European Biotechnology News Science & Industry
March 2013
II Intellectual Property
SPECIAL 33_EBSIN_SPECIAL_IP_Titel_tg.indd 33
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Nº 3 | Volume 12 | 2013
Euro|Biotech|News
35
Special: IP Intro
Bio-IP experiencing continental drift A strong patent position is a necessary prerequisite for commercial prosperity. This is especially true in the field of companion diagnostics, where the combination of precise testing systems with efficient treatments defines economic success. Recent legal judgments in the US, however, indicate crumbling judicial support for patents based on genetic sequences. In Europe, on the other hand, patent offices remain friendly to innovation in the area. Are the two continents drifting apart? Questions like this concerning companion diagnostics were discussed at the Berlin Conference on IP in Life Sciences in February. Stratified medicine has become a reality. However, the full potential of individualisation has not yet been tapped. “After all, not even our clothes are one-sizefits-all,” noted Prof. Dr. Jochen Maas at the 6th Berlin Conference on IP in Life Sciences. Sanofi’s chief scientist in Germany knows what he’s talking about. Personalised medicine is a topic close to his heart – and he’s far from alone in that. More than 100 people had travelled to the Dutch Embassy in Berlin, where the meeting was held, to discuss companion diagnostics and other IP topics. Patient classification is
only the first step on the customised medicines agenda. To truly establish the concept successfully, a social consensus still has to be struck in many areas. Maas noted that this will include a broad public debate – one that can’t avoid sensitive issues like the handling of patient data or the reimbursement for drugs, even though “there should be no discussions about cost at the patient’s bedside.” But there’s no getting around the fact that cost will play an important role in the development of personalised medicine. That topic was addressed by Sachin
Patenting is a living issue – over 100 participants took part in the 6th Berlin Conference on IP in Life Sciences, which was organised by BIOCOM in cooperation with the Dutch Embassy.
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Soni from the Dutch investment bank Kempen & Co. He vividly portrayed the ways in which biotech companies could position themselves to sell their products successfully – alone or in cooperation with a larger partner.
Recent rulings on IVD While advances in technology are driving the diffusion of personalised medicines forward, setbacks are coming from the legal side. Two recent rulings – Myriad Genetics and Prometheus – show that in the US, patents based on DNA sequences are now facing strong headwinds. “In the current situation, it is necessary to support a claim with additional elements that ensure a practical application. The claim has to be more than just a law of nature,” said Jennifer Gordon, a representative from Baker Botts LLP. According to Aliki Nichogiannopoulou from the European Patent Office, the EPO is currently much more friendly to innovation in the area than its counterpart in the US. Mathis Brauchbar (EvalueScience), Gabriele Pestlin (Roche), Peter van der Spek (University of Rotterdam) and Jos Rijntjes (Philips) reported from their daily activites, emphasising how much white space is left on the personalised medicine map. An interesting perspective was also put forward by Iris Simon from Dutch breast cancer diagnostics specialist Agendia BV, which has built up its global marketing from scratch. Regulator y matters were treated by Mirella Marlow from Britain’s NICE. The institute has implemented interesting strategies for a cost/benefit assessment of new diagnostic tools. Tobias Ostler (Regulanet) and Heiner Lüdemann (TÜV Rheinland) also touched on a sensitive point: due to a new EU legal initiative, the classification for in vitro diagnostics could soon become significantly more expensive, affecting niche products in particular. “A good diagnostic makes 20 million euros per year,” said Stephen Little from German industr y leader Qiagen. That’s small change in pharma terms, but it means even minor alterations to pricing can mean major changes to the bottom line. B
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36
Nº 3 | Volume 12 | 2013
Euro|Biotech|News
special: IP Interview
“A blueprint for future drug development” For the first time, pharmaceutical companies are opening up their compound libraries to biotechs and researchers. In the course of the EU's D196m European Lead Factory programme (see p. 15), seven Big Pharma firms are contributing 300,000 compounds to a Joint European Compound Collection (JECC), while SMEs are chipping in 200,000 newly synthesised scaffolds as well as drug targets and assays. The entities will be screened in a European Screening Library. EuroBiotechNews spoke with Dimitrios Tzalis, one of the coordinators, about IP protection within the Innovative Medicines Initative (IMI) project.
Euro|BioTech|News
?
Dr. Tzalis, what distinguishes this project from others?
! Tzalis: The European Lead Factory is a threefold paradigm shift in drug discovery. The seven pharma partners are for the first time opening the doors to their substance libraries – and thus their very special IP – for free. Second, academic researchers and biotech companies will receive full access to resources for screening 500,000 compounds with subsequent hit validation – which is far beyond their current financial scope. Last but not least, for the first time the project is pooling the productivity of SMEs, the creativity of academic researchers and the development knowhow of Big Pharma. It’s a real cooperative open innovation approach that can serve as a blueprint for future drug development projects. Euro|BioTech|News
?
What can you tell us about IP protection within such a large project?
! Tzalis: The 30 partners in the consortium have signed a project agreement that ensures confidentiality and non-use obligation. Those requirements also govern the IP of third parties that contribute proposals for
36_EBSIN3_13_Special_IP_Interview_tg.indd 36
substance libraries or innovative targets for screening. Information about the structures stored within the Joint European Compound Collection – including substance properties – are further protected by a special software supported process called “Honest Data Broker Process”. It limits access to a few authorised people to data that are relevant to the screening programmes.
Euro|BioTech|News
?
Are there any project-specific IP rules?
! Tzalis: Ownership of results and access rights are detailed in a project agreement which was negotiated and signed between the participants in accordance with the IMI-IP Policy and the associated guidance document issued by IMI. Pharma partners have a preferential right to negotiate on option agreements with the owner of a target. Euro|BioTech|News
?
Who gets what when there’s a hit?
! Tzalis: Access is regulated in the project agreement. The owner of a target or an assay decides how to deal with the results; whether to commence with R&D or commercialisation. Limitations could only come from the IP of a pharma partner who has brought in the compound or
Dr. Dimitrios Tzalis is the founder and CEO of Taros Chemicals. He received his PhD at the University of California, San Diego. Within the European Lead Factory, Taros is synthesising a part of the library and coordinating the overall synthesis of the library by providing the IT infrastructure Taros Gate.
from third-party rights. The drug patent rights of the pharma partner, however, cannot block further development.
Euro|BioTech|News
?
What’s the IP situation when a group contributes a specific scaffold to the library?
! Tzalis: Within the European Lead Factory, the five leading SMEs have each assigned 2-3 academic partners who will synthesise the compound libraries. The latter will be responsible for validating the scaffolds. Ownership of a scaffold and of the resulting library is split equally between the SMEs and the academic partners within the consortium. The right of commercial use is ruled by a milestone payment schedule that grants the exclusive rights for a substance to the project owners. As I said, the owner of a target or assay gets to select the best path for further development. Euro|BioTech|News
?
Can external groups contribute?
! Tzalis: Yes. A public web-submission portal for submission and evaluation of external proposals will be starting in 2014. B
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38
Nº 3 | Volume 12 | 2013
Euro|Biotech|News
Special: IP Substance Protection
Hands off gene patents! Dr. Ute Kilger, Dr. Markus Engelhard, Dr. Jan Krauss, Boehmert & Boehmert, Berlin
In Europe, patents on animals, plants and genes are under increasing pressure, while absolute substance protection is being eroded. Is the continent heading down a path that will turn it into a wasteland for innovation? Did you know that what are known as ‘biopatents’ are facing major challenges in both Germany and Europe? The field primarily involves proprietary rights to genetically modified animals and plants, but refers to gene patents as well. Now bio-patent ghosts are being systematically hunted down in Germany, and not only by the Greens and the political left. Associations like the German Farmers’ Association, breeders’ associations and other political players are also lending a hand. They have already frightened off the entire agri-biotechnology headquarters for the BASF Group, which has been moved to the US. Its disputed genetically modified potato Amflora, which produces an im-
portant product for this sector, has been “mashed”. In Europe, at least, the ghostbusters have reached their goal. For some time, the US has been more research- and patent-friendly when it comes to bio-patents, but this also changed with a recent Supreme Court Decision (Mayo vs. Prometheus). The top US judicial body ruled that certain diagnostic methods are not eligible for patenting per se, as they reflect a law of nature rather than an invention. The Supreme Court is now examining the longdisputed Myriad case. Myriad’s patent is directed at the human genes that correlate to a risk of contracting breast or ovarian cancer. The question up for discussion is whether human genes are patentable The court
Table 1: Substances produced in transgenic animals Substance
Description
Source/Animal
Sales of animal/year
A tPA
Tissue plasminogen activator to dissolve clots
milk/goat
US$75,000
A Factor VIII
Blood clotting factor, haemophilia treatment
milk/sheep
US$37,000
A Factor IX
Blood clotting factor, haemophilia treatment
milk/sheep
US$20,000
A Hemoglobin
Blood replacement
blood/pig
US$3,000
A Lactoferrin
Nutritional supplement for children
milk/cow
US$20,000
A CFTR
Cystic fibrosis transmembrane conductance regulator, CF treatment
milk/sheep, mice
US$75,000
A Human protein C
Anticoagulant, treatment for thrombosis
milk/pig
US$1,000,000
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has now set oral arguments for April 15, 2013. It will be interesting to see whether the ghostbusters succeed again. If they do, it could also have effects in other fields as, for example, genetic engineering within the pharmaceutical sector and the patentability of innovations in these areas. Let’s take a closer look at the ghostbusters. A large percentage of the population in Europe is fearful about genetically modified foods. There are also church associations and conservationists who view it as unethical to manipulate and patent living things at all. Furthermore, there are farmer and breeder associations. The farmers say they fear a possibly dangerous privatisation of biological diversity and the economic exploitation of genetic material as exclusive personal property, as well as a depletion of the gene pool. Many are worried that the “gene industry” will gain control over the entire food chain, and ultimately over the world’s genetic heritage. One hears over and over that there must be no patents for an animal or a plant because just such an organism could possibly also come about through selective biological breeding which, as a result, would cause the biological farmer or breeder to be blocked by such gene patents. Which genetic engineering products could be affected? GTC Therapeutics has invented a transgenic goat whose milk yields the recombinant human antithrombin-alpha. This protein in the goat’s milk is the subject-matter of the first approval in the US for a transgenic animal drug. Moreover, there is the sheep that produce Factor VIII or Factor IX in its milk, as well as many others (see table).
Where’s the logic here? How likely is it that natural breeding might produce a sheep or goat that in turn produces specific drugs? Isn’t the probability close to zero? And why should such a goat or sheep – one that produces a medically valuable protein in its milk – not be the subject-matter of a patent? Up to now, recombinant proteins have been produced in microorganisms such as E. coli, yeasts or even CHO cells. Genetically modified micro organisms like this can be patented. The same is true for genetically modified plants. The Amflora potato, for example, produces
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Nº 3 | Volume 12 | 2013
Euro|Biotech|News
SPECIAL: IP pure amylopectin instead of the amylopectin/ amylose mixture found in natural potatoes. Amylopectin is an important raw material for the paper and textile industries, as well as in building materials and adhesives. Because amylose is unsuitable for industrial purposes, the mixture in the natural potato must first be separated in a very labour-intensive process. How likely is it that an Amflora potato would come about through biological breeding? Cultivation of what’s called Bt-maize has been prohibited in Germany. Genetically modified MON810 Bt maize produces a Bttoxin that also acts as a pesticide. Allegedly – and this is the reason for this prohibition – the toxin also has harmful effects on other incidental organisms like butterflies. The strange thing is that apparently no one has a problem with the fact that pure Bt toxin is regularly sprayed on maize fields as a pesticide. Where’s the logic here?
Under threat – innovation Why all this ghostbusting after gene technology and biopatents? Isn’t it about vested financial interests – at least as far as the farmers and breeders are concerned? Are potential needs being served by the gene technology industry that can no longer be satisfied through conventional methods? In the face of a growing global population, increasing resistance to pests and shrinking natural resources, there appears at first glance to be a great need for innovation in the area of plant and animal breeding. Couldn’t we stop cutting down the rain forests if we had other ways of producing the raw materials we need? For example, through green gene technology? Couldn’t we fight hunger in Africa better if there were heat-resistant species that could better withstand droughts? Couldn’t we stop emptying oil reserves if genetically modified plants were used as an energy source? Is it that farmers are afraid that the gene technology industry will make them largely super fl uous – like horse-and-carriage drivers after the invention of the internal combustion engine? If there’s a political will, lawmakers can certainly find a way to protect the interests
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Dr. Ute Kilger (Boehmert & Boehmert, Berlin) studied chemistry at Germany’s University of Merseburg. Since completing her doctorate in biochemistry at the Freie Universität Berlin, she has worked for more than a decade in the patent departments of large pharmaceutical companies, including Boehringer Mannheim, Roche and Schering. Her fields of interest are molecular biology, immunology, biochemistry and pharmacology. Dr. Markus Engelhard (Boehmert & Boehmert, Munich) studied biology, chemistry and biochemistry in Frankfurt/Main, WittenHerdecke and Cambridge (UK), where he also completed his doctorate. His interests lie in IP protection in the areas of biochemistry, molecular biology and pharmacology. Dr. Jan Krauss (Boehmert & Boehmert, Berlin) studied biology at the Freie Universität Berlin. After finishing his training as a patent attorney, he worked with a large US law firm in Frankfurt/Main. His fields of interest are molecular biology, immunology, plantgenetics and biotechnology.
of farmers and breeders. But demonising bio-patents and eroding the patent system is the worst way to do that, because it’s at most hostile to research. Patents are important instruments for the protection of innovation, and thus must be the first line of advancement. For this reason, patents are an indispensable resource for a country not rich in raw materials like oil, gold or timber. Innovation is a valuable raw material that becomes usable only through patenting.
In the German Bundestag, the parliamentary groups of the CDU/CSU, SPD, FDP and Bündnis 90 /Greens have put forward a cross-party proposal to amend bio-patent guidelines, to amend the European Patent Convention, and to anchor these amendments in the new Patent Law. They are demanding, among other things, that socalled product-by-product claims no longer mean absolute substance protection in animals and plants, but must be restricted to the method actually used. This is an erosion of the principle of substance protection. Other representatives on the left demand that no more patents be granted for genes at all, as these are ‘a part of nature’. If genes can’t be patented, why then is it possible to do so with naturally-occurring proteins or natural chemical substances like penicillin? They have been patentable up to now because they were first made available by an innovator. Who would be helped by the existence of penicillin in nature if no one knew about it? By making natural substances available and usable, an innovator gains the right to patent protection. If there were no more patents for such substances, there would be no incentive to invest in such innovations. The same is true for genes. Moreover, if there was no absolute substance protection for important innovations, but the protection was restricted to a certain purpose or method, then patents would be too easy to circumvent, and innovations could not be effectively protected. And so our plea: hands off absolute substance protection! The lawmaker can find better ways to satisfy justified interests. For example, there is the option of limiting the effect of a patent. In Sec. 11 of German Patent Law, we find such limitations, for example, on actions in personal use, for the privilege of research and many others. In the same way, farmers or breeders who use purely natural methods could be excluded from the effects of a biopatent, as long as they really did renounce any gene technology innovations and products. There would also be the option of compulsory licenses for patents that adversely affect breeders and farmers. Surely anything would be better than to erode substance protection? Otherwise, there will be another ghost roaming Europe’s innovation wasteland.
08.03.2013 12:30:27 Uhr
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42
Nº 3 | Volume 12 | 2013
Euro|Biotech|News
Special: IP Outlicensing
Out-licensing in the life sciences sector Peter Homberg, Salans LLP, Frankfurt/Main
No matter what the industry, every company at some point faces a specific challenge – finding a financing model that is a good fit. In addition to traditional credit financing, however, the significance of alternative financing options has grown dramatically over the past few years, particularly in the life sciences sector. Life sciences firms generally have a high proportion of Intellectual Property (IP), which means outlicensing IP rights and expertise is a very attractive financing option. Increasingly in the last few years, licensing agreements between biotechs and Big Pharma have begun to be sealed during clinical Phase I, or even during the pre-clinical phase. When it comes to licensing projects at a stage this early, Big Pharma firms characteristically capitalise on biotech expertise within the scope of continued development of in-licensed technologies – for example by increasing commissions to out-licensing biotechnology companies as R&D service providers. As in other segments characterised by IP rights and expertise, numerous legal challenges in the life sciences sector have to be met in the run-up to and during the actual negotiations of a license project, and must at least be taken into consideration during the preparation phase. It is almost inevitable that confidential information and/or development results have to be exchanged in the run-up phase, as well as during contract negotiations or within the framework of research and development
42_44_EBSIN3_13_Special_Homberg_tg.indd 42
contracts, licensing agreements, or similar agreements. Such an exchange of information can occur only unilaterally – from one contractual partner to the (potential) other partner. A bilateral exchange of confidential information also often occurs in which both parties disclose valuable knowledge. In practical terms, it is therefore advisable that the conclusion of a confidentiality agreement is considered a first step in an early stage of contract negotiations, in order to ensure the best possible protection of in-
Peter Homberg is partner at the international law firm Salans LLP in Frankfurt, and heads its German Life Sciences Practice Group. His expertise focuses on all kinds of transactions in the field of IP, Private Equity and M&A for clients from the pharmaceutical, diagnostics, med-tech and biotechnology sector.
formation and development results that are disclosed by the contractual parties. The respective design of the confidentiality agreement (i.e. the question of whether such an agreement should be unilateral or bilateral) depends on practical application in each individual case. One aspect of tantamount importance is the conclusion of a customised confidentiality agreement, and ensuring complete and traceable documentation regarding the information provided. One possible foundation for this which is very common in practical applications is a sample contract, but one must consider that the particularities of each individual case always require a specific modification of standard clauses. The precise definition of the term “confidential information” is of particular importance, and one must ensure that this is customised to the specific situation in as much detail as possible. During the negotiations on the confidentiality agreement, as well as any subsequent out-licensing, the parties should consider the option of negotiating an arbitration clause. The greatest advantage of this is the non-publicity of arbitration proceedings. As mentioned above, this is of great importance in light of the significance of confidential expertise for the companies involved. The arbitration and
07.03.2013 14:01:48 Uhr
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Technical areas Mechanical engineering, electrical engineering, IT engineering, physics, chemistry, biotechnology, pharmacology, life sciences Services IP prosecution, IP litigation, IP searches, freedom to operate, contracts, annuities, arbitration, mediation, IP portfolio management, due diligence, strategic IP consulting, IP landscaping, IP valuation services
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44
Nº 3 | Volume 12 | 2013
Euro|Biotech|News
Special: IP procedural rules negotiated by the parties are decisive for the contractual negotiation of the arbitration clause. Different institutions offering the execution of arbitration proceedings provide standard clauses for negotiating arbitration clauses, which can then be adjusted to an individual case. In principle, arbitration clauses for individual institutions differ only in details. One should always ensure that the arbitration rule and other procedural aspects – i.e. the location of the arbitration court or number of arbitrators – is clearly regulated in the arbitration clause in order to prevent any disputes regarding formal aspects. Further procedures are also the result of a negotiated arbitration clause, and are regulated by an arbitration rule. In principle, the parties are free to select arbitration rules and agree on the basic points listed above. In international contract practice, parties often agree to apply procedures agreed by the International Chamber of Commerce
(ICC, France). However, one must note that the ICC has revised and updated the currently valid version of the arbitration rules that have been in force since 1998. The revised ICC arbitration rules were formally introduced in September 2011, and came into force in January 2012. The extensive revision addresses the increasingly complex situation of cases that are the object of disputes, and seeks to increase efficiency and lower costs. The new ICC arbitration rules now regulate even complex multi-party processes in a separate section, and include regulations regarding the bundling of arbitration processes. A new “Emergency Arbitrator” enables parties to file for urgent, preliminary or precautionary measures prior to involving an arbitration court. This provides preliminary legal protection within arbitration proceedings, and can be important particularly in protecting confidential information if another violation against
confidentiality regulations or a repeated disclosure of confidential information is to be eliminated. The regulations involving procedure have also been revised. To design negotiations for licensing transactions as efficiently as possible, the creation of a “Term Sheet” should also be considered during the preparation phase. This can ensure that the contracting parties are clear on the most important commercial items at an early phase of negotiations, and prevents possible deal-breakers during end-stage contract negotiations. In summary, one could say that the basis for the success of an out-licensing model is identifying the interests of every participant as early in the process as possible, and the creation of a balanced, contract ual solution that is acceptable for all parties. Then nothing will stand in the way of a successful licensing transaction, even if it also functions as a financing model. B
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