28 Jul Featured Interview: BaseLaunch Q&A session wtih Dr. Philipp Marchand
“IP rights are usually the true asset that a start-up company has.” Dr. Philipp Marchand talks wtih BaseLaunch and takes some questions from an audience on how to create value through IP asset management and valuation.
BaseLaunch: Why does everyone talk about Intellectual Property (IP)?
Dr. Philipp Marchand: The idea behind IP is to provide the inventor/applicant with a monopoly for 20 years in order to exploit that invention before others can exploit it. This should trigger investments into research, so that people make those investments and have a reason to invent.
BaseLaunch: Which types of IP exist?
Dr. Marchand: There are a couple of different types of IP rights, besides patents there are trademarks, design rights or copyrights, for example if you develop software. Generally, everything that is developed by the human intellect can give rise to intellectual property. If it’s a scientific or technical development, then patent right is the most appropriate IP right, whereas a name or logo would be protected by a trademark. A design right may be suitable for the packaging of a product, for example a kit that comes in a box identifiable as being provided by a particular company. However, 99% of what we talk about and what will create an asset for a start-up company is a patent right.
BaseLaunch: What are the requirements to have your patent granted?
Dr. Marchand: The main requirements are novelty and inventive step. There are also formal requirements, such as enablement, which means that a skilled person needs to be able to put the invention into practice. It cannot be something that is not doable. For novelty, the patent office examines whether the claimed invention is identical to what is disclosed in the prior art. The next step is to show that the claimed invention has a technical feature which imparts a surprising technical effect. This is a matter of argumentation and a matter of evidence, plausibility, what you can show with your scientific data and whether this technical effect is actually achieved. In general, a surprising effect can be anything, just like in the Olympics: citius, altius, fortius (faster, higher, stronger), but in most cases it needs to be supported by data.
BaseLaunch: What is the difference between filing a provisional, non-provisional, PCT (international application under the Patent Cooperation Treaty) and national phase application?
Dr. Marchand: The terminology, provisional and non-provisional, comes from US law. A provisional application is filed without paying fees, and it sets a priority date, which is the first date when the invention was filed. However, the provisional application itself will not mature into a patent. After one year you will have to file a subsequent application, which can be non-provisional, or a PCT, or national application. In 90% of cases we would file a European “non-provisional” first, where fees have to be paid, but in exchange you receive a search report for the patent within the priority year. You can then file a PCT application within the priority year, 12 months. From that PCT application you can derive national stage applications in almost all countries in the world, currently about 150 states.
BaseLaunch: How long is the process of getting a patent granted?
Dr. Marchand: It takes 3 to 4 years, sometimes even more, until you eventually get the patent right granted. This is quite a long process, during which you argue your case with the patent office over the patentability requirements, because in most cases they will cite prior-art documents against you. For example, they will argue that the claims are not novel or not inventive. In many cases the argumentation tends to be more scientific rather than legal in nature. This means that the inventors, or the responsible people from a start-up company, play a huge part in this process. At all these stages you will be involved and will have to help us– attorneys, to demonstrate that the claimed invention is novel and inventive over the prior art.
BaseLaunch: Any concerns about public disclosures?
Dr. Marchand: We are aware that, coming from a university as is usually the case, you are under pressure to publish your results. Probably your investors will also ask you to show or demonstrate what you have achieved. However, prior art in patent law is everything that is made available to the public prior to the filing date. It includes not only disclosures by third parties, but also disclosure by the inventors, which means anything you made available to the public will be held against you. It may be in writing, it may be orally, it may be basically a speech or presentation at a conference. Conference abstracts, for example, are very often cited against patent applications as prior disclosure. You have to file the patent application before you make something available to the public.
BaseLaunch: Is there a trick to accelerate the granting process?
Dr. Marchand: Yes, there is. You do not have to use the PCT track but may instead file national applications in countries where you wish to obtain fast patent protection. Even from a PCT, if you want to accelerate the process, which can take a couple of years, you can request accelerated examination, or you can waive the right to receive certain formal communications from the patent office, so that you can directly enter into substantial examination. The risk obviously is that the application might be refused by the patent office. A decision to refuse the patent application would be publicly available and may thus be viewed by examiners in other jurisdictions. However, if you think you’re novel and inventive granting can be accelerated by many, many years, even without incurring too many fees.
BaseLaunch: How do you enforce your patent rights?
Dr. Marchand: A patent right is not a licence to put something on the market. It is a defensive right, which can be used to prevent others from putting their products on the market. The competitor can do this, however, as long as you don’t enforce your patent right against them. Enforcement would mean suing the competitor for patent infringement. The competitor will most likely respond and challenge the patentability of your claims, which would mean that, if the claims were not patentable in the first place, the patent would also not be enforceable. This creates some uncertainty since, when you file the patent application, you cannot determine how this is enforced during the 20 years of the patent term. In many cases, when a start-up drafts something by themselves and files it through an inattentive attorney, those rights in the end don’t create any value because they are unenforceable. However, if there is value behind the application and it is well drafted, in our field, in biotechnology, a patent can be worth billions.
BaseLaunch: Can you share a good example of patent value and enforceability?
Dr. Marchand: For example, Herceptin from Roche was protected by patents. And these patents protected annual revenue of CHF 7 billion or more for Roche. But only because their patent rights were enforceable. The application was well drafted and a third party had no chance of challenging the patent rights. However, if a patent application is badly drafted because disclosure is missing, or explanations are missing as to why this is inventive, novel and so on, then it will not be enforceable and the value will, in the end, be zero, because it is not enforceable.
BaseLaunch: Is there any benefit from combining a composition of matter patent with a specific indication?
Dr. Marchand: The Holy Grail of patent law is compound protection. This protects any use of that compound (medical use, non-medical use, etc.). In many cases compounds are already protected or already known for some reason because they are in public databases or extracted from natural sources, for example. In the field of pharmaceuticals, you can then file a so-called purpose-limited product claim. It is not a composition of matter, but it is combined with a specific medical indication. This may still be a very valuable patent. A third party would not be able to offer the same product on the market for the same purpose.
Audience: What is the value of a patent?
Dr. Marchand: A patent application only creates value if the product being protected has market potential. Then the market can be protected by that patent. This requires a market analysis. However, the value at the stage of a start-up is difficult if not impossible to determine. But ultimately a patent is what someone is willing to pay for it.
Audience: If a patent cannot be filed, how do we determine the value of the company?
Dr. Marchand: If you don’t file a patent, then the value of the company is determined by your know-how and maybe some trade secrets because you are somehow better than your competitors. Without a patent the value would be the same, but you would have no guarantee that value will be maintained in the future, because every competitor could offer the same service. I’ve rarely seen cases, if any at all, where huge amounts of money have been paid for an idea that is not protected. This is unlikely to happen, at least in biotechnology or pharma.
BaseLaunch: How much does it cost to get a patent granted?
Dr. Marchand: It depends… it is a relatively reasonable price compared to what you have to spend on CROs (Clinical Research Organizations) or on research in general. During the first 2 years, the costs are in the low 5-digit range. However, 30 or 31 months from the priority date, you will have to enter national phases from a PCT application. This is when you need big money. Mainly because in Asian or South American countries you will have to file translations into national languages. These translations can be quite expensive. You are facing costs of about $10,000 per country. This is when you need money from investors.
BaseLaunch: How should start-ups think about patent families and patent extension?
Dr. Marchand: It’s a very important question, obviously, where to nationalize a PCT application. The more countries you file in, the larger your patent family is. However, it needs to be enforceable and many countries don’t offer a proper legal or court system that would allow the enforcement of a patent right. In those countries there may actually be no reason to file a patent. On the other hand, you have to do a market analysis and file the patent application in those countries where you actually plan to be on the market at some point. So it’s more like a business decision, rather than a decision driven by patent law. If you talk about creation of a portfolio of patents you should continuously file patent applications for improvements on your initial invention. I know this is expensive and the immediate reason might not be obvious to a start-up company. However, what is important to know is that, once an application is published, everyone, including the competitors, know about the application, and can file applications claiming the same compound for certain new indications, new formulations, new dosage regimens, treatment options, combination treatments, etc. This basically blocks you from marketing whatever is patented in those applications, even though you have a patent for the compound itself. You lack freedom to operate. Therefore, what all major pharmaceutical companies do is to file all these secondary, tertiary, quaternary applications themselves in the hope of being earlier than competitors. This can ultimately create a portfolio of, say, 200 patent families protecting only one molecule for indications, methods for its use, formulation, method of administration, and so on. In an ideal world this is what a start-up company would also do. Of course, this is not feasible because it’s too expensive. But you should definitely file new applications on a continuous basis for improvements that you make in the course of your research.
BaseLaunch: Do you have any final piece of advice for people looking to assess or grow their IP assets?
Dr. Marchand: You have to be aware as a start-up company that it is very unlikely that you will develop the product until it’s on the market. In 90% of cases you will have an exit strategy: sell it either to a big pharma company or to an investor. For those cases, where you don’t have profits from sales, the only asset you have is intellectual property and your know-how. But you shouldn’t overestimate your know-how, which is certainly very valuable, but IP rights are usually the true asset that a start-up company has. So you cannot invest enough in intellectual property to ensure that you are attractive to investors or potential buyers. Even large companies like Roche and Novartis spend huge amounts on IP because that is the only way they can make an investment into research reasonable and explain to their investors or shareholders why they make this multimillion investment into research.
About Dr. Philipp Marchand
Dr. Philipp Marchand joined Vossius & Partner in 2012 after graduating in biochemistry at the University in Frankfurt am Main and completing his PhD studies at a CNRS institute in Paris. He joined the Swiss office of Vossius & Partner in Basel in 2017 and became a partner of the firm in 2020. He focuses on strategic portfolio and value generation for startup companies. At the same time, he provides portfolio and risk assessments for venture capitalists and startup investors. Dr. Marchand is the exclusive IP partner of BaseLaunch. Moreover, he has been accredited with the Swiss government as an Innosuisse Special Coach for IP. He currently works on his doctoral degree in law at the University of Basel where he investigates the applicability of copyright law in biotechnology. Vossius & Partner is a leading patent law firm offering a full-service concept with legal competence from patent attorneys in every technological sector and attorneys-at-law qualified to practice not only in Europe and Switzerland, but also in the United States, Japan, Taiwan, China and Korea. The firm employs 55 patent attorneys and 20 attorneys-at-law in their offices in Munich, Düsseldorf, Berlin and Basel.