How can IP increase revenue or reduce costs = profitability?

The value in a company is based on the company’s key product offering.  It becomes important that the key products retain their competitive advantage in the marketplace.  A first step toward retaining value should be identification of risks:

1. How might your product be diluted by others entering the market;
2. How robust is the supply chain, what can disrupt your ability to supply the market;
3. Are protections in place to ensure employees cannot take or disrupt the technology if they leave; and
4. Does the company have a board that understands the importance of transactional agreements and the IP Portfolio to the risk management profile?

Case Study

Pharma is a clinical stage biotechnology company with a focus on developing and commercializing its innovative technology in cancer treatment.  Pharma has devoted substantially all its efforts to research and development activities and has not yet generated any revenue.   Pharma has financed its operations through the issuance of common and redeemable convertible preferred stock.

Pharma’s innovative technology is a small molecule that treats solid tumor cancer resistant to immunotherapy.   The molecule is only effective when used in combination with Big Pharma’s patented agonist.

Pharma has an alliance with Big Pharma.  Pharma will provide innovative technology to Big Pharma for running clinical trials.  Pharma will pay Big Pharma for each patient dosed in the clinical trial.

Pharma faces early-stage risks including the outcome of clinical trials, development by competitors of new similar innovations, dependence on key employees, adequate protection of key technology, government regulations, and ability to secure additional capital and fund operations.

In the above circumstances the ability to obtain, maintain, and protect the innovative technology is key to maintaining a competitive position and providing shareholder value.

The Pharma board should be asking management some basic questions:

• Where and how is the company innovation protected;
• What, at a minimum, does the company need to protect;
• Should there be protection of the company and product name;
• What threat is presented by generics or other pharma companies; and
• How robust is the supply chain and third-party manufacturer (TPM), can the company still produce product if there is a failure here?

Pharma’s patent portfolio consists of:

1. A patent application for a method of treating cancer using a combination of Big Pharma agonist and the small molecule.  The application was filed in the US, CA, MX, JP AU, EO, CN, HK;
2. A patent for the process of making the small molecule.  The application was filed in ES, EP, DK, US, AU, KR, SG, BR, EP, CA, JP, MX, ES, CN, NZ, RU, IL, ZA, JP; and
3. The compound patent limited to the small molecule. The patent is issued only in JP.

There is no in-house patent attorney, and the patent filing decisions are made by the founder and CEO.

The outside patent attorney has no visibility to the companies’ long-term goals, resource allocation strategy, or strategic planning.

The board has no knowledge of patents or R&D and they are leaving all innovation decisions to the founder and CEO.

In this case study the company has not protected the small molecule in their key markets.   At the same time, they have allocated resources to maintaining an unenforceable patent around the world.

The key innovation for Pharma requires robust agreements and licenses with Big Pharma and the continued production of Big Pharma agonist.

A board member who has senior corporate experience and is a patent attorney would understand Pharma’s growth objectives, ask why certain filing decisions are being made, and suggest allocation of resources to ensure that innovation is driving value.

Do you have a patent attorney on your board? Should you?