Cost-effective management of IP for life science companies
November 2023 | SPECIAL REPORT: HEALTHCARE & LIFE SCIENCES SECTOR
Financier Worldwide Magazine
November 2023 Issue
It is a tough climate at the moment for young life sciences companies, particularly in the UK where there has been a significant reduction in the availability of funding compared with previous years. Many companies state they are spending increasing amounts of time trying to secure Series A or Series B funding. Hopefully, this slowdown in funding is short-lived.
However, when cash is tight difficult decisions may need to be made in order to preserve existing intellectual property (IP) and cost effectively manage emerging IP. So, how do you ensure your IP position is protected and secure when your IP budget is limited?
First, remember that while saving money on your IP budget is important, it is crucial not to compromise on the quality and effectiveness of your IP protection. IP is usually critical to a company’s valuation, and usually the most valuable and important asset of a young life sciences company.
Sadly, IP is usually the only asset of any significant value that remains in the event of insolvency. Working effectively with an IP attorney can help a company implement cost-saving strategies while preserving the integrity of its IP. It is important for companies to work with attorneys who offer good value for money and are transparent on costs, so that the company is able to plan and budget effectively.
Outlined below are a number of ways to make companies make their IP budgets go further.
Regularly review the IP portfolio. Assess and eliminate outdated or irrelevant IP assets to reduce maintenance costs. The most valuable IP asset may change over time. For example, foundational IP, on which the company start-up was based, may become less relevant once a company has generated some product specific IP or raised its first round on finance. In our experience, these early IP filings, perhaps filed on a budget by a university, may not be the best quality and struggle during prosecution because of overly broad claims or a lack of exemplification. Companies should consider how much it is costing to prosecute and maintain their foundational IP – is this still justified in all territories?
Prioritise IP assets. Identify and focus on protecting the most valuable IP assets, rather than trying to protect everything. Explore alternative IP protection options such as trade secrets, which can be more cost-effective than patents.
In-house expertise. Develop some in-house expertise in patents, so that there is someone in-house who is nominated as the patent specialist, with knowledge of the company’s IP portfolio and the science. This patent specialist is particularly useful during that patent drafting process, by collating technical information and interacting with the external patent attorney – making the whole process more efficient and cost effective. Conduct preliminary patent searches to identify prior art before engaging a patent attorney. This can help a company avoid unnecessary costs on ideas that may not be patentable.
Conduct a cost-benefit analysis. Evaluate the potential return on investment (ROI) for each IP action, such as filing a new patent or trademark, and prioritise those with the highest potential ROI.
Streamline IP processes. Optimise internal processes to reduce the time and effort required for IP management, such as a standardised invention disclosure process.
Negotiate fees. Negotiate fixed fees with IP attorneys and service providers, especially for patent drafting and ongoing maintenance tasks. Be careful not to compromise on quality here – mistakes or omissions made at the patent drafting stage usually cannot be rectified once the application has been filed.
United States Patent and Trademark Office (USPTO) fees. Companies need to ensure they are paying the correct amount of fees for filing and maintenance, most small and medium enterprises (SMEs) will qualify for small entity status (unless they have licensed their IP to a large entity). If a company qualifies, it should take advantage of micro-entity status, which offers an 80 percent reduction in fees for patent applications and maintenance.
Utilise government programmes and grants. Explore government incentives or programmes that may reduce the costs associated with IP protection or offer grants to cover IP costs. For example, the US government’s Cancer Moonshot Expedited Examination Pilot Program – also known as ‘The Moonshot Program’ – offers fee reductions and expedited examination of patent applications in the fields of oncology or smoking cessation that have an eligible method claim, for example methods of treating cancer using an immunotherapy. UK government grants are available that offer modest amounts of funding for an initial IP audit plus follow-on funding that may be used for an initial patent filing.
Collaborate and license. Explore partnerships, collaborations and licensing agreements to share the costs and risks of IP protection and commercialisation.
Patent financing. Explore patent financing options offered by specialised firms that provide funds to cover patent-related expenses in exchange for a portion of future royalties – but be careful not to give too much away here.
Monitor the IP budget. Companies should continuously track and analyse their IP budget to identify areas where cost savings can be achieved. Ideally, it is advisable to work with an IP firm that will assist in building an annual forecast.
Reduce ongoing IP costs. Consider working with a boutique or smaller IP firm, one with specialist expertise in working with SMEs in the life sciences sector, that are able to take a strategic view of the management of the company’s portfolio and will engage in regular dialogue rather than generating fees by sending long, complicated emails full of legalese.
Deferring patent costs can be useful for businesses with limited budgets and particularly if the company is awaiting the next round of funding – below are some strategies to consider.
Priority patent applications. It is usual to file a priority patent application first as it gives companies a year to assess the commercial viability of their invention before committing to the more expensive national patent application or Patent Cooperation Treaty (PCT) application. However, if a company is unsure on commercial viability, or does not have funding available, it is possible to abandon and refile the priority application (assuming no publication has been made by the company or others) at very low cost. This strategy may be used multiple times, but a company runs the risk of a competitor filing a patent application on the same or a similar invention.
Payment plans. Companies should negotiate payment plans with their patent attorney to spread the cost over time rather than paying a lump sum upfront.
Delay maintenance fees. Once a company has a granted patent, it can defer some costs by delaying the payment of maintenance fees. However, be aware of the consequences, such as penalty fees for late payment as well as the potential loss of patent rights.
Delay patent prosecution. Extensions of time for responding to office actions are available in most territories. In Europe, extensions of up to six months may be obtained without the payment of fees. USPTO extensions of up to three months are also available with the payment of escalating fees.
Finally, it is important to strike a balance between cost-saving measures and ensuring that the company’s patent portfolio is strong and comprehensive to protect its inventions effectively. IP is the most important asset for life sciences companies. Consulting with a patent attorney is essential to navigate these strategies while maximising the value of IP rights and, therefore, the company.
Catherine Lovell is a senior attorney at Stratagem IPM. She can be contacted on +44 (0)1223 550 740 or by email: catherine.lovell@stratagemipm.co.uk.
© Financier Worldwide
BY
Catherine Lovell
Stratagem IPM