and Gabrielle LaHatte2
(1)
Formerly an Intellectual Property Litigation Associate with Klarquist Sparkman, LLP, Portland, OR, USA
(2)
Formerly a Staff Attorney with Tarolli, Sundheim, Covell & Tummino, LLP, Cleveland, OH, USA
Abstract
The impetus for physicians to participate in the process that translates clinical and benchtop discoveries to commercializable products has arguably never been greater. Medical innovation increasingly provides physicians with an opportunity to create alternative revenue streams. It can also impact career advancement, as many research universities are beginning to consider whether faculty have any patents or pending patent applications, along with more traditional metrics, such as peer-reviewed publications, when making decisions related to professional advancement. Some innovations have been highly successful, such as Dr. Latina’s patent on selective laser trabeculoplasty. As the pace of medical innovation increases, the strategic importance of physician involvement with intellectual property management and the commercialization process continues to grow. Recent changes to the patent laws in the United States have increased the physician’s opportunity to participate in the patent prosecution and the commercialization process.
Disclaimer:
This chapter should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This chapter is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation or any specific legal questions you may have.
Introduction
The impetus for physicians to participate in the process that translates clinical and benchtop discoveries to commercializable products has arguably never been greater. Medical innovation increasingly provides physicians with an opportunity to create alternative revenue streams. It can also impact career advancement, as many research universities are beginning to consider whether faculty have any patents or pending patent applications, along with more traditional metrics, such as peer-reviewed publications, when making decisions related to professional advancement. Some innovations have been highly successful, such as Dr. Latina’s patent on selective laser trabeculoplasty.1 As the pace of medical innovation increases, the strategic importance of physician involvement with intellectual property management and the commercialization process continues to grow. Recent changes to the patent laws in the United States have increased the physician’s opportunity to participate in the patent prosecution and the commercialization process.
Introduction to Commercialization
The origin of university-led biomedical innovation commercialization as we know it today began with the Bayh-Dole Act.2 Adopted in 1980, the Act permits universities and nonprofit institutions to “elect to retain title” of the federal government’s (but not necessarily the inventor’s) intellectual property rights arising from federally funded research, provided that affirmative steps are taken to achieve “practical application” of the invention by way of either direct commercialization or licensing.3 By electing to take title, universities are able to prosecute patents arising from federally funded research at their own expense and reap the financial rewards of any ensuing licensing or commercialization efforts. Today, such university-directed patent prosecution and commercialization efforts are often directed by Technology Transfer Offices (“TTOs”).
In general, the Bayh-Dole Act has been regarded as a tremendous success. In the 1970s, before Bayh-Dole, it was estimated that the US government owned over 28,000 patents, only 4 % of which had been developed into products used by the public.4 Simply put, taxpayers were not realizing the benefits of federally funded research. In contrast, today over 80 universities have each received more than $1 million in running royalty payments from licensed innovations, demonstrating a dramatic upswing in the successful commercialization of federally funded research.5 Much of this improvement is attributable to the concerted efforts of TTOs. Many important innovations might have failed to make the transition from clinic, operating room, or benchtop discovery to commercial success if it were not for their efforts.
While a university may “elect to retain title” to the government’s interest under Bayh-Dole, the employment agreement between university and employee controls the extent to which a university may own an employee’s intellectual property.6 However, determining the extent to which an employment agreement assigns the employer rights to an employee’s intellectual property can be complex. The US Supreme Court recently described intellectual property assignment clauses in employment agreements as “technical drafting trap[s] for the unwary.”7 Regardless of the exact language used, it is important for physicians to understand how their employment agreement or employer’s intellectual property assignment policy may grant a university rights in any invention developed during the course of the physician’s employment. To ensure that an employer does not inadvertently allege ownership of inventions created before employment commences, it may be prudent for a physician to disclose or file patent applications on all preexisting innovations. It may also be wise to consult an attorney.
Additionally, the employment agreement or intellectual property assignment policy may determine what portion of revenue a physician may receive if an invention created during the course of employment is commercialized successfully. Unfortunately, a physician may not have any control over how their invention is commercialized. Recent changes to patent law in the United States have made this issue more poignant than ever before, because inventors are no longer required to actively participate in patent prosecution, as discussed below.
Where an employment agreement or an intellectual property assignment policy controls, it is customary for a TTO to distribute roughly 40 % of net revenue to the inventors. However, this figure varies widely from university to university within the United States. The portion of revenue shared with the physician inventor is often defined as a percentage of net revenue, i.e., revenue earned less the TTO’s expenses, including patent prosecution. Patent prosecution expenses may run into the hundreds of thousands of dollars, depending on a multitude of factors including complexity of the invention and the number of countries where patent protection is sought. In some cases, nothing is distributed to the inventor until all patent prosecution and associated TTO costs have been recouped by the university.
It is worth noting that in some cases the percentage and scheme of revenue sharing may be negotiated, along with other employment terms. For example, an institution may be willing to modify its policy for a well-established physician who has a proven record of successful innovation. However, when negotiating such terms, it is important to remember that the division of revenues should keep the interests of the physician and university substantially parallel, as TTOs can add tremendous value to commercialization outcomes. University administrators often closely scrutinize TTO performance based on metrics such as net revenue generated by all TTO commercialization efforts, as well as the total number of deals completed. Therefore, even if the physician has tremendous leverage, assigning an inadequate portion of revenue to the university may dampen enthusiasm for aggressive commercialization campaigns involving the physician’s innovations.
Physicians may find themselves free to pursue their own commercialization efforts in the absence of other obligations, such as might be the case with a physician in private practice. Consultation with an attorney specializing in biomedical commercialization and patent prosecution may be prudent before approaching any potential partners. A physician should carefully consider at least filing a provisional patent application and asking potential partners to sign to nondisclosure agreements before disclosing anything. These and other measures may help protect a physician’s intellectual property, even within the context of preliminary and informal commercialization efforts. Given the transition from a first-to-invent to first-to-file patent system, provisional patent applications will arguably become increasingly important to the individual physician approaching industry contacts as part of self-directed commercialization efforts, as discussed below.
Patent Law Basics
Whether or not patent protection is necessary for the commercialization of any given invention should be evaluated on a case-by-case basis. However, patent applications and issued patents can be powerful tools in the commercialization process.
If the pursuit of patent protection is appropriate, it is prudent to have a handle on the contours of patent law before approaching a TTO or industry partner. It may be particularly useful to roughly understand the legal rights secured by an issued patent, what is and is not patentable, what “prior art” is, and what one must do in order to avoid barring the patentability of one’s own invention.
The process of obtaining a patent, also known as patent prosecution, begins when a patent application is prepared and filed with the United States Patent and Trademark Office (“USPTO”). After filing an application, a patent examiner will review the application as part of a nuanced process to determine if the application complies with all applicable patent laws. After examination, the patent examiner may allow the application to issue as a patent. However, it is more likely that the examiner will initially reject a portion of the application. In such an event, the applicant may respond to the examiner’s rejections and can amend the application in order to put the application in condition for allowance.
In the United States, a patent provides only the right to exclude others from making, using, selling, offering for sale, or importing the patented invention.8 A patent does not grant the right to practice or use the patented invention. As such, it is possible for an inventor to patent an invention, wherein the rights of other patent holders may limit the actual practice of the invention. For example, if a physician patents a new method for using an already patented surgical apparatus, the physician cannot thereafter make and use the entire apparatus in conjunction with their new method without regard for the preexisting apparatus patent. In such a scenario, the holder of the apparatus patent would be a natural partner with respect to the commercialization of the physician’s new method. In fact, the physician’s patent may be of little monetary value if the method cannot be practiced without other manufacturer’s apparatuses and the singular owner of the patented apparatus is disinterested in partnering with the physician.
To appreciate the potential value of patents, it is helpful to understand why the United States created a patent system in 1790 with the passage of the first Patent Act.9 The Founding Fathers understood the value of spurring innovation and progress, so they included a provision in the Constitution instructing Congress “[t]o promote the Progress of Science and the useful Arts, by securing for limited Times to … Inventors the exclusive Right to their … Discoveries.”10 Though adverse to the tyranny of monopolies, the Founding Fathers, particularly Thomas Jefferson, believed that “an inventor ought to be allowed a right to the benefit of his invention for some certain time,” such that “ingenuity should receive a liberal encouragement.”11 Despite temporarily restricting the public’s use of a new invention, this sanctioned monopoly was designed to reward inventors and encourage commercialization of new technologies while also promoting the disclosure of inventions to the general public.12 “The patent laws promote this progress by offering a right of exclusion for a limited period as an incentive to inventors to risk often enormous costs in terms of time, research, and development. The productive effort thereby fostered [has] a positive effect on society through the introduction of new products and processes of manufacture into the economy, and the emanations by way of increased employment and better lives for our citizens.”13
Since then, Congress has occasionally updated the patent system, most recently with the passage of the Leahy-Smith America Invents Act (“AIA”) in 2012.14 However, Congress’s authority to promote the useful Arts is tempered with the understanding that Congress may not grant temporary monopolies which “remove existent knowledge from the public domain, or [] restrict free access to materials already available.”15 Thus, Congress has enacted laws to effectuate its goal – laws which define what subject matter is patent eligible and outline the conditions for patentability.16
Patentable Subject Matter
35 U.S.C. § 101 defines the scope of patentable subject matter. Specifically, anyone who “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof may obtain a patent.”17 Conversely, a person cannot obtain a patent on “laws of nature, natural phenomena, and abstract ideas.”18 For example, “a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter. Likewise, Einstein could not [have] patent[ed] his celebrated law that E = mc2; nor could Newton have patented the law of gravity. Such discoveries are ‘manifestations of . . . nature, free to all men and reserved exclusively to none.’”19 These restrictions ensure that the “basic tools of scientific and technological work” remain free and available to all.20 However, even though a law of nature or abstract idea by itself is not patentable, “an application of a law of nature or mathematical formula to a known structure or process” may be patent eligible.21
Historically, this requirement received relatively little attention because it was generally assumed that a patent application was attempting to claim patentable subject matter. However, the Supreme Court recently revisited the issue in Mayo Collaborative Services v. Prometheus Labs, Inc., reminding us that we cannot simply assume a patent meets the requirements of § 101.22 At issue in the case were patents that claimed a method for optimizing the dosage of thiopurine drugs used in the treatment of immune-mediated gastrointestinal disorders, such as colitis and Crohn’s disease.23 The claims directed physicians to examine levels of certain thiopurine metabolites, namely, 6-thioguanine (“6-TG”) and 6-methyl-mercaptopurine (“6-MMP”), to determine if the thiopurine dosage was within the drug’s therapeutic range. If the metabolite levels were above a certain number, this indicated that the dosage should be decreased, whereas if the levels were below another value, the dosage should be increased.24 In finding the claims were directed to unpatentable subject matter, the Supreme Court emphasized that patent protection is only for inventions which apply a law of nature and “one must do more than simply state the law of nature while adding the words ‘apply it.’”25 The Supreme Court found that the patents-in-suit merely instructed doctors to apply a well-known consequence of thiopurine metabolism in routine, well-understood, or conventional ways previously used by researchers in the field.26 This case has severe implications for the biotechnology industry, because it has significantly limited the patentability of medical diagnostic methods. For example, this means that a physician cannot patent a diagnostic method that claims the naturally occurring correlation between the severity of glaucoma and a patient’s interocular pressure. A physician would have to include additional elements or steps that apply this natural principle in order to have a patent eligible invention. For example, a patentable method of characterizing a disease by measuring levels of a particular protein could be patentable if the method involved detecting the protein with a novel antibody.27 Alternatively, a method wherein a doctor undertakes a unique and specific treatment plan that applies a well-known law of nature might also be patentable.28
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