IP for life sciences startups: Protecting your most valuable assets

Mark Wilke: Welcome. My name is Mark Wilke. I am a partner at Gowling WLG and a Canadian Patent and Trademark Agent. This presentation is intended to provide you with an introductory understanding of the various intellectual property assets for the life sciences companies. We will cover each of the following IP assets: patents; industrial designs; trademarks; copyrights; and trade secrets. I will discuss each of these in turn and compare and contrast these assets as we proceed through the list.

Let's get started with patents. Patents protect inventions. A patent gives the patentee a legal monopoly for a limited time, typically 20 years, to exclude others from making, using and selling products and services related to your invention. In exchange for this monopoly, you must teach the public how to practice your invention. This so called patent bargain is intended to encourage rapid innovations through the timely sharing of knowledge. As you can imagine, the patent monopoly is valuable. This is because it gives you a window of time to exclude others from commercially benefitting from your invention so that you can recover research and development costs, which in the life sciences industry can be very significant. Because R&D costs can be so high, you will need investors, and in many cases potential investors will want to know that a patent application has been filed. Licencing and cross-licencing is another reason to patent. Your business may involve licencing your patented technology to others, whom have experience with bringing a product to market, or to bring a product to market yourself you may need to obtain licences to use another party's patented technology, and your own patents can then act as a bargaining chip in cross-licencing negotiations. Lastly, having patents covering various aspects of a technology can act as a significant deterrent to competitors.

What exactly can you patent? As we said, patents protect an invention, which in broad terms can be defined as a technical solution to a technical problem in the art. In more practical terms, you can patent such things as devices or machines, compositions of matter, for example a chemical compound or biological product such as an antibody or vaccine, or a method or process. For example, a method of making a product or diagnostic or research assay. Related to methods are new uses for existing products. For example, the new use of an existing drug for treating a disease that was previously not known to be treated with the drug. All of these are what is known in the patent world as patent eligible subject matter. In addition to being patent eligible, the invention must also be both new and non-obvious given what was previously known to the public. Finally, the invention must be useful. These three conditions are frequently known as novelty, non-obviousness or inventive step and industrial applicability. We will talk more about these in the next slide.

Another way of looking at patent eligibility is to consider what cannot be patented. As we mentioned, the invention must be novel. This condition excludes anything that has already been disclosed to the public, whether that disclosure was oral, written or something sold. Beyond merely being new, the invention must also not be obvious. This is somewhat subjective, but generally, the invention should not have been suggested in the prior art and should be more than a minor improvement that would be the result of routine trials or optimization. An invention must also be useful. That is, have utility or industrial applicability. It cannot be something that is merely esthetic and it must actually work. So for example, you cannot patent a drug when you have no evidence that it would actually be effective. Returning to subject matter eligibility, various things cannot be patented. For example, you cannot patent a mere idea or scientific principle. You can, of course, patent devices or methods that make use of a scientific theorem. Not all countries have the same rules of patent eligibility. Certain countries prohibit patenting a method of surgery or treating a patient. The United States allows this. Other countries do not. In Canada and Europe, it is possible to patent the use of a drug for treating a patient, which provides similar protection to a method of treatment. Products of nature, for example, an unmodified gene or naturally occurring antibody, are not patentable in the United States. Although they are patentable in both Canada and Europe. Diagnostic methods can be challenging to patent in the United States as well as in Canada. But in many cases aspects of these inventions can still be patented with good legal advice. You cannot patent higher life forms in Canada, such as a transgenic mouse, although again, there are ways of drafting and prosecuting an application to protect these types of inventions.

We mentioned that a patent grants a 20 year monopoly. In Canada this term may be extended by up to 2 years for new small molecule and biologic drugs that have passed regulatory approval. To be eligible the patented drug must contain a medicinal ingredient that was not previously approved in Canada. This term extension is intended to partly compensate innovators for the time invested and research in obtaining regulatory approval in Canada. A similar patent term extension system is also available in the United States.

Let's move onto industrial designs, alternatively called design patents in the United States. In contrast to patents, which can protect how a product functions, industrial designs protect the appearance of the product. Namely the shape, configuration, pattern or ornamentation of a product. The protection can be for the entire product's appearance or can apply to just a distinctive portion of the product. For example, industrial designs can be used to protect the shape of a Coca-Cola bottle, a distinctive pattern of colours on clothing or the appearance of a graphical user interface of an app. In the life sciences two examples are the shape and markings of a pharmaceutical tablet or the design of a blister pack. The monopoly granted for industrial designs is less than that of patents. Generally 10 to 15 years. Like patents, this monopoly can be used as a weapon to exclude competitors from using the designs in their own products. To be eligible for protection the design must be a new design that is not previously disclosed to the public. Compared to patents the scope of protection for industrial designs is much more narrow. Meaning that even a minor change in the appearance of the product can result in non-infringement. On the other hand, industrial designs are much quicker and less expensive to obtain than patents.

Trademarks are a very different kind of intellectual property. A trademark is a unique sign used to distinguish one company's goods or services from others in the marketplace. Examples include symbols, words, phrases, designs, 2-D or 3-D, holograms, moving images, sounds, scents, tastes, textures and more. The intent of a trademark is to enable a purchaser to distinguish the goods or services offered by one company from the goods or services offered by another company. Trademarks grant the trademark owner the ability to prevent others from using the trademark, not just for 10 or 20 years, but indefinitely with a caveat that the trademark owner must continue to use the trademark in commerce and must take steps to prevent others from infringing. Trademarks can be registered but some trademark rights exist even without registration. Registration does have benefits, however. Unregistered trademark rights are granted by the common law and require sufficient use, for example in marketing and product packaging, within a geographic region to establish a reputation associated with the trademark. In contrast, registration of a trademark may be granted based on use or merely proposed use. Proposed use permits a company to seek and obtain trademark rights before investing heavily in marketing materials. The scope of unregistered rights is limited to the geographic region in which the company can show it has used the mark in commerce and acquired a reputation. By contrast, registered trademark rights are extended to the entirety of the registered country. Another benefit of registering a trademark is that it provides the trademark owner with a presumption of validity. Meaning that in an enforcement proceeding against an infringer the defendant would have to prove invalidity of the trademark. In contrast, enforcing an unregistered trademark would place the burden on the trademark owner to prove, among other things, that there was sufficient reputation to identify the distinctiveness of the owner's goods or services in association with the unregistered trademark in the mind of the consumer. Lastly, registration provides the benefit of having the trademark advertised and searchable in a public database. Something not available for unregistered marks.

At this point in the presentation it may have occurred to you that 3-D shapes are protectable using both industrial designs and trademarks. This is true. Industrial designs have an advantage over trademarks in that industrial design rights do not require use of the design. On the other hand, registered trademarks have the benefit of being renewable in perpetuity. These advantages can be combined by initially registering a novel industrial design and then registering the 3-D shape as a trademark before the design term expires and once the 3-D shape has been used in commerce to distinguish the company's products or services.

Copyright grants the exclusive right to produce, copy, publish or perform original literary, dramatic, musical and artistic works. In the context of life sciences companies, things that can be copyrighted include manuals, software including source code and the object code generated from the source code, specifications, logos, drawings, etcetera. The term of monopoly granted for copyright is currently equal to the lifetime of the author plus 50 years in Canada. The term in the USA is the lifetime of the author plus 70 years. Canada will soon be adopting the lifetime plus 70 year term to meet its obligations under the United States Mexico Canada Agreement signed in 2018. Copyright is automatic, meaning no registration is necessary, although registration may be required in some countries to initiate infringement proceedings.

Our final category of IP asset is trade secrets. Trade secrets can be used to protect any kind of information so long as that information is not publicly disclosed. This includes inventions, designs, software, data, manuals, methods and more. There are two general requirements for a trade secret. It must have commercial value and the company must take reasonable efforts to maintain the information as secrecy. Reasonable efforts to maintain secrecy typically involve educating employees and having them sign confidentiality clauses, having third parties sign non-disclosure agreements before sharing trade secrets with them, limiting access, marking materials as confidential and using encryption, passwords and physical lock and key. There's no registration process for trade secrets and the protection only lasts as long as the information remains a secret. Trade secrets can therefore, theoretically, have an infinite life span but they will be lost if the secret ever becomes known to the public. If a trade secret is wrongfully obtained by a competitor the owner can sue for damages and seek an injunction to prohibit use of the information but such efforts may be futile if the result is that the secret becomes widely known. Trade secrets do not protect against someone reverse engineering the secret from public information or from independent discovery or development of the trade secret. In fact, for trade secrets that relate to patentable technology there is a risk that a third party will independently develop your secret tech and then seek to obtain patent rights. If they are successful then they may be able to exclude you from using your own technology. With that in mind, it is important to carefully consider when it would be better to patent and when it would be better to keep something secret. In most cases, the best approach is usually one that includes both patents and trade secrets. Recall that to obtain a patent a company must publicly disclose how to make and use the patented technology. This is the so-called patent bargain for which a government grants a monopoly of 20 or so years. A company therefore cannot withhold information that would prevent a competitor from actually using or reproducing their patented technology. In fact, patents have been invalidated where a court decided certain information had been withheld. With that in mind, there is still a role for trade secrets. For example, a company developing a new drug product may protect the drug and its therapeutic use with patents, and disclose a synthetic scheme to manufacture the drug to fulfill the patent bargain. However, manufacturing the drug at a commercial scale may be non-trivial and it could potentially be the subject of a further patent, or may be better protected using trade secrets. Consider the example of antibody drugs which can have very complex manufacturing processes and where even small changes in process can result in heterogeneity or decreased activity of the resulting product.

Here are just some of the useful considerations when trying to decide between patents or trade secrets. First, if a product is sold without patent protection, could it be reversed engineered? Second, will it even be possible to obtain a patent that will sufficiently protect the technology from competitors for attempting to design around the claims of your patent? Thirdly, can you keep the technology secret? We've already mentioned some reasonable measures that can be taken by a company to try to keep information secret. We should also consider whether keeping the secret would cripple the company's ability to secure funding or business partners. Keep in mind that not everyone will be willing to sign an NDA. Lastly, if you obtain a patent, will you spend the money to enforce it? Keep in mind that litigation is costly and time consuming.

We've now discussed all five of the main categories of IP assets but a bonus category worth mentioning is data protection. In fact, for therapeutic innovators this category can be just as valuable as a patent. Canada and some other countries have a data protection system that is intended to compensate innovators for the long time it takes to perform clinical trials in bringing a new drug to market, which can consume much of the innovator's patent term. It works like this; regulatory approval of a generic drug will not be approved for sale before 8 years after the approval of the innovative drug. This term is extended a further 6 months for pediatric drugs. Considering that the patent term is generally 20 years, and it can take 12 or more years to bring a drug to market when accounting for clinical trials, this data protection regime provides protection against competitors rapidly piggybacking off the clinical trial data generated by the innovator company and therefore, rapidly entering the market once the innovator's patent term expires. Which may only be a few years once the drug is approved.

I hope that this presentation has impressed upon the importance of intellectual property to life sciences companies. While patents are usually the first IP asset to come to mind for technology producing businesses, patents should be combined with other categories of IP, as each has advantages that collectively will translate into increased competitiveness. Lastly, always seek out the advice of professional IP counsel. I thank you for your attention.