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U.S. Patent Reforms Might Force Firms to Rely on Trade Secrets(BioWorld Today Via Acquire Media NewsEdge) BIO 2008 SAN DIEGO - Recent Supreme Court rulings and reform at the U.S. Patent and Trademark Office (USPTO), coupled with activity in the World Health Organization and the World Trade Organization, are weakening patents and tipping the scales toward keeping innovation in biotech as trade secrets rather than risking patent disclosure. "Most people would say the BIO [convention] is a love-fest for patents," said Michael Gollin, a partner at Venable LLP. "But everywhere else people hate them. Even the USPTO has a disdain for patents," he told a session on 'The Rise of Trade Secrets in Biotechnology," at the annual 2008 Biotechnology Industry Organization meeting. While it would seem evident that industry in general ought to like patents, that is not the case. "The electronics industry has come out against them," Gollin said, "which leads us to think about their value [in biotech]. They may be considered vital to innovation, but the forces gathered against patents mean they are weaker and more difficult to enforce in the U.S. than 10 years ago." And although there have been improvements in patent protection elsewhere, notably in India and China, the ruling against Novartis AG's Gleevec patent in India points to enforcement problems in those arenas too. The flight away from patents can be seen in filing statistics. The number of chem/bio patents filed at the USPTO rose from 30,000 per year in the mid-1990s to 45,000 in 2001. By 2006, the level of filing had fallen back to where it stood 10 years earlier. Similarly, at the European Patent Office, there was a 13 percent year-on-year increase between 1995 and 2000, followed by a 6 percent year-on-year fall from 2000 to 2003. But, Gollin said, "biotech is still innovative, so where is innovation going if not into patents?" The answer seems to be that the scales are tipping back in favor of keeping trade secrets, posing the question of whether biotechs prefer the patent or trade secret approach when it comes to protecting their intellectual property. For David McElroy, president of the agricultural biotech firm Targeted Growth Inc., the answer is "do-it-yourself" IP protection. "We sell plants all over the world . . . and where patent protection is weak or unclear you see the rise of other methods, particularly in agbiotech," he noted. One example is hybrid systems, where the farmer cannot sell on seeds. Another is endpoint pricing, in which, rather than granting licenses to genes up front, farmers are charged when crops are taken to the mill for processing. The issue of keeping trade secrets is imposing a limitation on the offshoring of R&D to countries where costs are lower but intellectual property protection is weaker. "The tendency is to keep trade secrets and know-how at corporate headquarters, and so this influences what R&D you do elsewhere," McElroy said. The rise of synthetic biology will present even greater challenges he contended. "Synthetic biology is getting ahead of IP protection because there is more and more ease to work around composition of matter for genes." On the other hand, agbiotech has very good protection of one fundamental piece of know-how, which is the technique for carrying out transformations. "You can publish a method for juggling four balls in the air, but that doesn't mean your competitors can do it," McElroy said. In the case of crop transformation, knowing the method does not provide the know-how, as evidenced by how few organizations have managed to do it. The increased reliance on trade secrets and know-how to protect IP raises cultural and management issues, given that the easiest route for those types of information to be disclosed is through current and former employees. That is a particular problem in biotech said Kerry Flynn, vice president of intellectual property and licensing at Shire Human Genetic Therapies Inc. "It is an incestuous community; employees leaving to join a competitor down the street makes keeping trade secrets a bit of a challenge." Flynn confirmed that Shire's view of the landscape for patenting has changed of late because of higher standards in the granting of patent rights and the fact that recent legal rulings make it less likely for the company to get injunctions. "When we were a small biotech company, we were more aggressive in patent filing because that was important. Whether we could afford to protect them or not was another matter," Flynn said. "Now, as a bigger company, we think we can protect value better through trade secrets." As a result, the company has set up a formal process to protect trade secrets. In addition to signing nondisclosure agreements on joining Shire, new employees are briefed by a lawyer on the company's policy. They are reminded also of their duty of confidentiality to previous employers, in a bid to ensure that Shire cannot be accused of stealing trade secrets from other companies. The reforms to U.S. patent law mean the system will be friendlier to infringers than patentees, as it will make U.S. patents less reliable, easier to be challenged and cheaper to infringe, Ed Grieff, senior partner at Amylin Pharmaceuticals Inc., told conference attendees. However, Grieff said he believes that for small private biotechs without products, patents remain essential because that is where most of their value resides. Patents are important in fundraising, doing licensing deals and needed at the point of going public. "It is tragic for small companies that there is a movement against patents," Grieff pointed out. "It won't help innovation." n ? ? Copyright ? 2008 Thomson BioWorld, All Rights Reserved. |