The Value of Intellectual Property.

As someone who has spent time practicing medicine and in a biotech start-up company, I am struck by how different the two cultures are. The rules of the game are different, and behavior and attitudes that make a practicing clinician successful may hinder personal performance in a different setting. The business world is also undergoing rapid change from an industrial age to a new economy based on information, the Internet, and global networks.

All of this can be bewildering to the physician who is attempting to make the transition from clinical medicine to the biotech startup world. And nowhere is the tension between the two cultures more pronounced than in the area of intellectual property. Most practicing physicians never think about patents or intellectual property and believe that information about new therapies should be spread as quickly and cheaply as possible to improve medical care and help patients. Intellectual property is also an interesting barometer of the changes that the new economy brings to the business world.

Intellectual property is in many ways an offspring of new technology; until Gutenberg invented the printing press there was no real reason to worry about the legality, morality, or economic impact of copying someone else's ideas. The new economy, with its global networks, generates tension between creators and users of intellectual property by developing efficient, innovative, and inexpensive ways to create and communicate ideas. My 13-year-old son, who is a fan of Napster, is following with great interest the civil trial between the music industry and the website that allows him to download music for free.

Protecting ideas and inventions

Jack Valenti, President and CEO of the Motion Picture Association of America, told Congress, "If you can't protect what you own--you don't own anything." Biotech start-up companies expend considerable energy and expense on obtaining patent, copyright, trademark, and trade secret protection for their ideas and inventions because of the considerable time and expense involved with discovering, developing, getting approval, and bringing to market a new therapy or device.

Sheryl Gay Stolberg and Jeff Gerth writing in The New York Times estimated that the process of developing a new drug takes 12 to 15 years at a cost of more than $500 million per drug. This $500 million includes the laboratories, raw materials, scientist salaries, and clinical trials used to develop the successful drug, but the majority of it represents "years and dollars spent on scientific leads that prove fruitless."

Leon Palandjian, MD, of AGTC Funds in Cambridge, Massachusetts, says, "In technology-intensive areas, such as biotechnology, it is absolutely essential for a venture capitalist to assess the quality of a start-up company's intellectual property. Start-ups with a proprietary technical advantage, protected by a strong patent position, attract the most talented entrepreneurs and the greatest amount of venture capital." On the other hand, Palandjian says, "A new company often fails to qualify for venture backing if its technology is not proprietary, unprotected, or infringes patents held by others."

Biotech companies utilize a variety of legal vehicles to protect themselves and try to enhance the possibility of recouping the considerable expense of research and development. Patricia Schreck, General Counsel of Genomics Collaborative, a start-up company in Cambridge, Massachusetts, thinks that patents and trade secrets are more important to most biotech companies than copyright and trademarks, as they protect early research results and guard against independent development of the same discovery by others.

A trade secret is anything that is not known generally and that gives the biotech company a competitive business advantage. Chemical formulas, manufacturing processes, and the recipe for Coca-Cola are all examples of trade secrets. Advantages of trade secrets over patents include possibility of longer-term protection, less cost, no public disclosure, and immediate protection. Disadvantages include the need to take reasonable precautions to maintain confidentiality, lack of protection from someone independently discovering the secret, and lack of protection from someone using a sophisticated analytic tool to discover the secret.

A utility patent gives the biotech company the right to exclude others from manufacturing, using, or selling its invention. It must file an application with the Patent and Trademark Office, the inventor must be identified, and a detailed description of how the invention works must be made public if the patent is granted. Utility patents give the company exclusive rights for up to 20 years from the time of filing.

It is up to the company to monitor infringement of its patents; lawsuits alleging infringement can be quite costly and must be brought within six years of the harmful activity. In some cases, it makes more sense to offer the infringer a license under the patent because of the high cost and uncertain outcome of civil litigation. Those accused of patent infringement may well challenge the validity of the patent and the case for infringement.

Tension and invention

Michael C. McFarland writes thoughtfully about the tension between producers of information who want to control and profit from the risk they took in developing the new information and society, which wants information communicated and shared to benefit all. New developments and inventions never originate from a single inventor, and communicating and disseminating the new information inspires others to further innovations. The new global economy based on the Internet has made possible dissemination in a way unthinkable just a few years ago, and some believe this wave of innovation may be part of the reason for the rise in productivity associated with the Information Age.

Richard G. Lynch, MD, Professor of Pathology at the University of Iowa, sees both positive and negative aspects of patents and nicely summarizes how this tension plays out in real life. "I go to conferences where the presidents of the large pharmaceutical companies say they need the right to patent to stay in business because it takes so long and so much money to get a new drug to market. I also go to university meetings where companies are criticized for patents, but I think an equal amount of blame should be assigned to universities who go after patents. It's not a matter of profit or not-for-profit organizations, it's a matter of the patent process getting in the way of scientific progress because information is not shared until the lengthy patent process is completed."

Patricia Schreck, JD, takes a different view: "Patents can be an effective way to allocate scarce research dollars by driving research to new and different areas not already covered by patents. In this way, innovation is stimulated by forcing researchers to find new ways to solve problems, rather than playing in the same sandbox."

Kent Bottles, MD, is President of the Genomics Repository of Genomics Collaborative, Inc., in Cambridge, Massachusetts.

KEY CONCEPTS

* Intellectual Property

* Patent and Copyright Protection

* The New Economy

* The Culture of the Business World

* The Biotech Start-up World

Physicians entering the biotech start-up world can find this entrepreneurial culture bath invigorating and bewildering. Biotech start-up companies expend considerable energy and expense on obtaining patent, copyright, trademark, and trade secret protection for their ideas and inventions because of the considerable time and expense involved with discovering, developing, getting approval, and bringing to market a new therapy or device. Biotech cam ponies utilize a variety of legal vehicles to protect themselves and try to enhance the possibility of recouping the considerable expense of research and development. This column outlines the advantage and disadvantages to patents and trade secrets and describes why intellectual property plays a key role in getting a new innovation to market.