Patent Law
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In an increasingly hot biotech market, protecting IP is key
After a record year for biotech investment in 2020 — during which the industry saw $28.5 billion invested across 1,073 deals — the market for new innovations remains strong. What’s more, these innovations are increasingly coming to market by way of early-stage startups and/or their scientific founders from academia.
In 2018, for instance, U.S. campuses conducted $79 billion worth of sponsored research, much of it thanks to the federal government. That number spiked amid the pandemic and could increase even more if President Biden’s infrastructure plan, which includes $180 billion to enhance R&D efforts, passes.
Since 1996, 14,000 startups have licensed technology out of those universities, and 67% of licenses were taken by startups or small companies. Meanwhile, the median step-up from seed to Series A is now 2x — higher than all other stages, suggesting that biotech startups are continuing to attract investment at earlier stages.
When it comes to protecting IP, early and consistent communication with investors, tech transfer offices and advisers can make all the difference.
For biotech startups and their founders, these headwinds signal immense promise. But initial funding is only one part of a long journey that (ideally) ends with bringing a product to market. Along the way, founders will need to procure additional investments, develop strategic partnerships and stave off competition. All of which starts by protecting the fundamental asset of any biotech company: its intellectual property.
Here are three key considerations for startups and founders as they get started.
Start with an option agreement
Most early-stage biotechnology starts in a university lab. Then, a disclosure is made with the university’s tech transfer office and a patent is filed with the hopes that the product can be taken out into the market (by, for instance, a new startup). More often than not, the vehicle to do this is a licensing agreement.
A licensing agreement is important because it shows investors the company has exclusive access to the technology in question. This in turn allows them to attract the investments required to truly grow the company: hire a team, build strategic partnerships and conduct additional studies.
But that doesn’t mean jumping right to a full-blown licensing agreement is the best way to start. An option agreement is often the better move.
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IP strategy: How should startups decide whether to file patents
Bryant Lee, Ed Steakley & Saleh Kaihani
Contributor
Contributor
Bryant Lee is the co-founder and managing partner of Cognition IP, a YC-backed IP law firm for startups. Ed Steakley was the Head of IP at Airware and Senior Patent Counsel at Apple. Saleh Kaihani is a partner at Cognition IP.
Deciding what to patent can be a confusing process but by creating a formal process it is something that every startup can manage.
Intellectual property (IP) is one of the most valuable assets of a startup and patents are often chief among IP in terms of value. Patents allow the startup to prevent competitors from using their technology, which is a powerful feature that can grant unique advantages in the marketplace.
From a business perspective, patents can help with driving investment and acquisitions, provide protection during partnerships and business deals, and help defend itself against patent lawsuits by others.
However, startups also often have a hard time determining when and what to patent. Innovative startups are inventing new things on a regular basis, and there is a danger of slipping into a haphazard approach of patenting whatever happens to be available rather than systematically analyzing the business needs of the company and protecting the IP that moves the needle the most.
Moreover, startups must balance the need to protect IP with other areas of the business: Patents are complex documents that require an investment of time and resources to obtain. They often require specialized legal counsel to write and a lengthy examination process at the U.S. Patent & Trademark Office (USPTO).
This article is a how-to guide for startups to make the decision on when and what to patent with a mature approach to IP strategy.
Table of Contents
- Creating a regular IP harvesting process
- Invention cataloging and scoring
- The scoring system
- Conclusion
Creating a regular IP harvesting process
In order to make a decision about what to patent, a startup must first know what IP it has. For very small teams, it may be possible for everyone to have a shared idea of the IP. However, once teams grow beyond a few people, it is no longer possible to have complete visibility into what everyone on the team is doing and potentially inventing. Therefore, a regular IP harvesting process must be put in place to ensure proper reporting of IP to the executive level.
Most startups are best served with a simple IP harvesting process involving just three steps: (1) disclosure (2) invention review and (3) patent filing. In the disclosure stage, employees who are in IP creation roles must be trained to disclose ideas that are potentially protectable IP.
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Microsoft gives 500 patents to startups
Microsoft today announced a major expansion of its Azure IP Advantage program, which provides its Azure users with protection against patent trolls. This program now also provides customers who are building IoT solutions that connect to Azure with access to 10,000 patents to defend themselves against intellectual property lawsuits.
What’s maybe most interesting here, though, is that Microsoft is also donating 500 patents to startups in the LOT Network. This organization, which counts companies like Amazon, Facebook, Google, Microsoft, Netflix, SAP, Epic Games, Ford, GM, Lyft and Uber among its close to 400 members, is designed to protect companies against patent trolls by giving them access to a wide library of patents from its member companies and other sources.
“The LOT Network is really committed to helping address the proliferation of intellectual property lawsuits, especially ones that are brought by non-practicing entities, or so-called trolls,” Microsoft CVP and Deputy General Counsel Erich Andersen told me.
This new program goes well beyond basic protection from patent trolls, though. Qualified startups who join the LOT Network can acquire Microsoft patents as part of their free membership and as Andersen stressed, the startups will own them outright. The LOT network will be able to provide its startup members with up to three patents from this collection.
There’s one additional requirement here, though: To qualify for getting the patents, these startups also have to meet a $1,000 per month Azure spend. As Andersen told me, though, they don’t have to make any kind of forward pledge. The company will simply look at a startup’s last three monthly Azure bills.
“We want to help the LOT Network grow its network of startups,” Andersen said. “To provide an incentive, we are going to provide these patents to them.” He noted that startups are obviously interested in getting access to patents as a foundation of their companies, but also to raise capital and to defend themselves against trolls.
The patents we’re talking about here cover a wide range of technologies as well as geographies. Andersen noted that we’re talking about U.S. patents as well as European and Chinese patents, for example.
“The idea is that these startups come from a diverse set of industry sectors,” he said. “The hope we have is that when they approach LOT, they’ll find patents among those 500 that are going to be interesting to basically almost any company that might want a foundational set of patents for their business.”
As for the extended Azure IP Advantage program, it’s worth noting that every Azure customer who spends more than $1,000 per month over the past three months and hasn’t filed a patent infringement lawsuit against another Azure customer in the last two years can automatically pick one of the patents in the program’s portfolio to protect itself against frivolous patent lawsuits from trolls (and that’s a different library of patents from the one Microsoft is donating to the LOT Network as part of the startup program).
As Andersen noted, the team looked at how it could enhance the IP program by focusing on a number of specific areas. Microsoft is obviously investing a lot into IoT, so extending the program to this area makes sense. “What we’re basically saying is that if the customer is using IoT technology — regardless of whether it’s Microsoft technology or not — and it’s connected to Azure, then we’re going to provide this patent pick right to help customers defend themselves against patent suits,” Andersen said.
In addition, for those who do choose to use Microsoft IoT technology across the board, Microsoft will provide indemnification, too.
Patent trolls have lately started acquiring IoT patents, so chances are they are getting ready to make use of them and that we’ll see quite a bit of patent litigation in this space in the future. “The early signs we’re seeing indicate that this is something that customers are going to care about in the future,” said Andersen.
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It’s a draw in latest Qualcomm v Apple patent scores
It’s Qualcomm 1, Apple 1 in the latest installment of the pair’s bitter patent bust-up — the litigious IP infringement claim saga that also combines a billion-dollar royalties suit filed by Cupertino alleging that the mobile chipmaker’s licensing terms are unfair.
The iPhone maker filed against Qualcomm on the latter front two years ago and the trial is due to kick off next month. But a U.S. federal court judge issued a bracing sharpener earlier this month, in the form of a preliminary ruling — finding Qualcomm owes Apple nearly $1 billion in patent royalty rebate payments. So that courtroom looks like one to watch for sure.
Yesterday’s incremental, two-fold development in the overarching saga relates to patent charges filed by Qualcomm against Apple back in 2017, via complaints to the U.S. International Trade Commission (ITC) in which it sought to block domestic imports of iPhones.
In an initial determination on one of these patent complaints published yesterday, an ITC administrative law judge found Apple violated one of Qualcomm’s patents — and recommended an import ban.
Though Apple could (and likely will) request a review of that non-binding decision.
Related: A different ITC judge found last year that Apple had violated another Qualcomm patent but did not order a ban on imports — on “public interest” grounds.
ITC staff also previously found no infringement of the very same patent, which likely bolsters the case for a review. (The patent in question, U.S. Patent No. 8,063,674, relates to “multiple supply-voltage power-up/down detectors.”)
Then, later yesterday, the ITC issued a final determination on a second Qualcomm v Apple patent complaint — finding no patent violations on the three claims that remained at issue (namely: U.S. Patent No. 9,535,490; U.S. Patent No. 8,698,558; and U.S. Patent No. 8,633,936), terminating its investigation.
Qualcomm said it intends to appeal.
The mixed bag of developments sit in the relatively “minor battle” category of this slow-motion high-tech global legal war (though, of the two, the ITC’s final decision looks more significant), along with the outcome of a jury trial in San Diego earlier this month, which found in Qualcomm’s favor over some of the same patents the ITC cleared Apple of infringing.
Reuters reports the chipmaker has cited the contradictory outcome of the earlier jury trial as grounds to push for a “reconsideration” of the ITC’s decision.
“The Commission’s decision is inconsistent with the recent unanimous jury verdict finding infringement of the same patent after Apple abandoned its invalidity defense at the end of trial,” Qualcomm said in a statement. “We will seek reconsideration by the Commission in view of the jury verdict.”
Albeit, given the extreme complexities of chipset component patent suits, it’s not really surprising a jury might reach a different outcome to an ITC judge.
In the other corner, Apple issued its now customary punchy response statement to the latest developments, swinging in with: “Qualcomm is using these cases to distract from having to answer for the real issues, their monopolistic business practices.”
Safe to say, the litigious saga continues. And iPhones continue being sold in the U.S.
Other notable (but still only partial) wins for Qualcomm include a court decision in China last year ordering a ban on iPhone sales in the market — which Apple filed an appeal to overturn. So no China iPhone ban yet.
And an injunction ordered by a court in Germany forced Apple to briefly pull certain iPhone models from sale in its own stores in January. By February the models were back on its shelves — albeit now with Qualcomm not Intel chips inside.
But it’s not all been going Qualcomm’s way in Germany. Also in January, another court in the country dismissed a separate patent claim as groundless.
A decision is also still pending in the U.S. Federal Trade Commission’s antitrust case against Qualcomm.
In that suit the chipmaker is accused of operating a monopoly and forcing exclusivity from Apple while charging “excessive” licensing fees for standards-essential patents. The trial wrapped up in January and is pending a verdict.
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Outside of AI, companies are doing less research and more development
If you’ve been following the headlines in the world of AI, you might be fooled into thinking that corporations are doubling down, rather than withdrawing, from pure research. But on the ground, things are considerably more complicated — tech companies are spending more on the development part of R&D while relying more on cash strapped universities to move the needle on… Read More
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