Patents - heading for expiry?
The following article was published by Nexxus today in their publication for the Scottish business community “Informing Business”. Other articles in this issue outlined the need for young companies to have appropriate contracts in place to protect their IP from the beginning notwithstanding the many other demands on their finances and management time – something I heartily endorse and some of the differences between US paten law and international norms.
” The traditional model for drug development assumes a strong patent position to incentivise investors to put up large sums of money for what is an inherently risky proposition. Other forms of intellectual property and alternative methodologies for achieving an exclusive or at pre – eminent market posion are generally considered supplementary forms of protection or are addressed only in the absence of the preferred patent position. Over the last few years however this model has increasingly been criticised as unsustainable. Few blockbuster drugs are coming to market as improvements to existing therapy increasingly become incremental and treatments more patient-specific while the costs and difficulties of patneting continue to grow.
My introduction to thinking seriously about other drug development models came when I participated in a workshop with British and Canadian academics to doiscuss how knowledge is used within the life science industry. Informally known as the Un IP Group, the idea was to set aside our preoccupation with intellectual property and to look at other forms of knowledge management. An account of our discussions was published in Scripted (vol 7, issue 1, p32). The group noted that a great number of businesses operate very successfully without form IP protection sometimes because their business changes too quickly for it to be worthwhile – as with certain consumer goods – or because the life cycle of the industry is too long, such as in the timber industry. Service companies may capitalise on other forms of knowledge such as customer or distribution knowledge or particular internal skill sets. It is clear that when innovation is looked at in its broadest sense, intellectual property forms only one part of the knowledge landscape.
These are not just academic musings as other parts of the innovation community are also thinking beyond intellectual property in assessing value and developing opportunities. It is well understood, for example that investors regard the team as importnat as the technology – do they have development and marketing experience, have they raised and managed investment funds before? An individual’s network may also hold the key to success. This summer’s UNICO ( the association of university technology transfer officers) conference discussed research demonstrating that deals were most frequently achieved where there was a pre-existing link between the academic and the business partner. I beleive this is crucial not just in relation to cloing the deal but right through the development process to ensure that appropriate advice is obtained at key decision points.
At the end of the day, however, investors will still want to know what sort of competitive risk they face. In a recent article in Landslide (vol 2, No 6, p11) Mark Halligan advances an interesting argument in favour of making more use of trade secrets, which are often easier to protect and enforce than patents. His ideas are compelling in relation to matters that cannot be reverse engineered and maybe we should give more thought to the potential for treating ideas as trade secrets but many products are simply too easily copied for this to be a viable option. It would also be a problem for ideas sourced from academia, where publicatio is a core requirement.
Within the Un IP Group we wondered whether the pharmaceutical industry as opposed to life science more generally, was an outlier from the industrial norm and, notwithstanding the benefits of looking at other forms of knowledge management for other industries pharmaceuticals whould have to remain patent dependent.
In fact pharma is looking at alternative models – companies like Pfizer are buying up generic businesses while Christopher Viehbacher, CEO of Sanofi told Forbes Magazine in July that he was looking for opportunities that were not based on patents so that the company would avoid the sudden drop in sales that generally follow patent expiry. He felt that Sanofi’s resources would allow the company to take advantage of opportunities that a smaller company might be unable to realise. the example he gave was of their acquisition of Chattem, a company with expertise in marketing non prescription medicines, which could allow them to take their allergy product, Allegra, into the consumer market. While relying on strong consumer branding is certainly an obvious route, one can think of other opportunites- say where a company has unusual skills or service models or where it has a strong position in relation to scarce raw materials or production expertise.
Other companies are beginning to look quite seriously at models of open innovation with the Open Innovation Symposium held recently in Montreux attracting international participation including senior executives from a number of substantial pharmaceutical companies. As yet it is not clear how far along this road they would be prepared to go. In the past there have been various attempts to bring industry and academia together to develop precompetitive science and most recently GSK has announced a strategy based on open innnovation in relation to develoiping better products for malaria and other tropical diseases. This has included an “open lab” with seed funding for new research and making 13,500 potential anti-malarial compounds available for scientists to exploit. It is early days and one would not expect such a new approach to be adopted with respect to a company’s major revenue drivers until such time as it has been fully “debugged” in relation to some of its more peripheral activities. One area where I do expect to see a greater adoption of open innovation techniques however is in relation to “sphere crossing” whereby companies look at other sectors for ideas and technologies to improve or combine with their own. We are already starting to see this is relation to pharmaceuticals, analytical services and bio informatics, while increasingly novel methodologies are being explored for remote diagnosis and monitoring.
It would be naive to believe that in the short term the industry, and more importantly perhaps investors, will move dramatically away from patents and the traditional development approach. Indeed even within the Un IP Group we found it very difficult to focus our discussions without constantly referring to the traditional patent model! Nonetheless, there are clearly opportunities here for fresh thinking about how we do business and the sorts of products and services we could be developing. Some businesses are already developing ideas in this space and it will be interesting to see how the industry at large reacts as their ideas come to fruition.