SubscribeRealizing Value from Intellectual Assets Requires Careful Planning
The convergence of pharmaceuticals, biological products, and medical devices in combination products such as drug-coated or advanced delivery devices is a large and growing trend. According to Navigant Consulting, the combination product market is set to grow 10 percent per year, reaching nearly $9.54 billion by 2009.
Combination products bring together the power of advanced therapeutics with the precision dosing made possible by sophisticated delivery technologies. Because of their hybrid nature, combination products frequently rely on innovations from a number of different sources and involve collaborations or licensing arrangements among partners. For this reason, it is crucial for all participants to understand the intellectual property (IP) issues related to combination product development and commercialization. To achieve success in the combination product marketplace, organizations should understand the essential elements of an IP strategy, know how to use IP to gain transaction leverage, and keep abreast of industry and IP trends.
The Value of Developing an IP Strategy
Intellectual assets, a large portion of which are protected via IP, are replacing land, energy, and raw materials as an organization's most valuable resource. In 2005, the Economist reported that as much as three-quarters of the value of publicly traded companies in America comes from intangible assets. However, there are still a significant number of companies that do not have a strategy for IP development and management.
When intellectual property (IP) development is linked to business objectives via an IP strategy, the IP protects the company's core technology and ensures that IP resources are utilized to support the business.
A carefully executed IP strategy facilitates the development of a valuable IP portfolio that companies can leverage when they enter into partnerships, in-licensing or out-licensing arrangements, mergers, acquisitions, or other types of joint ventures. More often than not, a company with a strong IP position will receive better terms in a transaction when compared to a company with a weak IP position. For example, a strong IP portfolio can serve as a bargaining chip in requests for shared royalties, or as a trading card in negotiations among partners.
This transaction leverage is critical for both large and small companies. Although large companies may have the resources to develop and manufacture combination products on their own, there may be a significant opportunity to partner with a smaller company. Alternatively, small companies may not have the in-house talent and capital needed to develop and manufacture combination products and thus will be forced to look for partnering or licensing opportunities. Such arrangements make it crucial for companies of all sizes to strategically create, document, and develop their IP assets, ensuring that they can leverage their IP position to receive more favorable terms in future transactions.
What is an IP Strategy?
By definition, an IP strategy is a plan or method to use IP to achieve business objectives. By linking IP processes and management to business objectives via an IP strategy, organizations can ensure that IP has a purpose, thereby reducing the competitive risks associated with ad-hoc IP development. The end result of a properly formulated and executed IP strategy is that the IP will "lead the business." In other words, the IP will be in place for use when the business needs it rather than requiring the IP to catch up.
An IP strategy connects your core portfolio of ideas, invention, IP, and innovation to IP management processes that create value and reduce costs. To fully maximize ROI from innovation, an IP strategy also outlines tactics that will produce returns relevant to your business objectives.
For example, a large medical device company may realize that there are opportunities to integrate pharmaceuticals into a new device. However, the medical device company does not plan to develop this opportunity into a product. Instead, the company develops an IP strategy to put patents in place that will provide leverage in future licensing transactions, joint-ventures, or litigation if third-parties decide to enter this space.
In another example, a small medical device company developing combination products desires to strategically build its IP portfolio for the purpose of increasing the company's value during acquisition. The company obtains IP across the value chain, including compositions, methods of making the devices, the device itself, methods of using the device and integration into larger systems. Because of this effort, the company is able to articulate and leverage the strength of its IP position across the value chain prior to acquisition.
In both cases, the IP was used not only to defensively protect the company's core technology, but to also proactively advance each organization's business objectives. The IP was already in place for the large company when third-parties entered an emerging technology space and it maximized value of the small company at the time of the acquisition.
How to Develop an IP Strategy
The most important aspect of developing an IP strategy is the communication between business, legal, technical, and marketing departments within an organization. Without this communication, it is difficult to align the development of the IP portfolio with corporate business objectives of the organization, creating the risk of ad-hoc IP development.
Once this communication is established, there are five critical steps to developing and implementing an IP strategy:
- Identify Business Objectives With Respect to Combination Products
Before IP can be used to achieve business objectives, these goals must be identified, preferably derived from C-level executives. Examples may include:- Develop a strong IP position around a combination product launch.
- Develop IP around a combination product opportunity not currently being pursued.
- Address competitors developing combination products.
- Evaluate the Current IP of the Organization that Maps to Combination Products
Once the organization understands its business objectives with respect to combination products, the current IP of the organization should be mapped to this combination product opportunity. This process allows organizations to understand the strengths and weaknesses of its IP position and grasp where the opportunities for IP exist. - Review the Competitive IP Position Relevant to Combination Products
Now that the organization understands its own position with respect to a combination product opportunity, it is critical to evaluate the competitive IP in the relevant technology space. Questions to address include:- Are there many patents filed or issued in this technology space?
- Where do they map on the value chain, in other words, where are they patenting?
- Are they large companies or small companies?
- Are device companies integrating pharmaceuticals? Are pharmaceutical companies obtaining IP on devices?
- What are the trends? What are the opportunities?
- Use this Information to Develop an IP Strategy that Aligns with Business Objectives
Once the business objectives, current IP position, and competitive IP position are understood, an informed, proactive IP strategy can be developed to achieve the identified business objectives of the organization. Examples of using elements of an IP strategy to achieve business objectives are illustrated below.- Develop a strong IP position around a combination product launch. Extract, document and file patents across the value chain, from raw materials to methods of use.
- Develop IP around a combination product opportunity not currently being pursued. Facilitate creative brainstorming sessions, in conjunction with patent counsel, that result in enabled combination product patent filings around the company's core technology.
- Address competitors developing combination products. Defensively publish prior art around combination product opportunities around company's core technology, increasing difficulty for competitors to obtaining patents.
- Implement and Execute the IP Strategy
Executing an IP strategy can be a challenging task. The following guidelines will greatly improve the implementation process:- Even the most well conceived IP strategy is doomed to fail if C-level executives do not buy-in. Therefore, it is critical to ensure that both the business objectives and the IP strategy are developed with C-level executive input.
- It is critical to develop an IP strategy that is not only executable with the resources available to the organization, but that also has execution items that are assigned to designated parties with deadlines.
- Finally, IP strategies should be proactively updated on a routine basis. There may be new competitive information or a change in business objectives that should redirect the efforts of the IP strategy.
Keeping Abreast of IP Trends
Medical and pharmaceutical technology is increasingly based on combinations of individual technologies. The rise of these combination products is likely to fuel greater collaboration as well as competition, as formerly separate players become partners or competitors.
There will always be "disruptive technologies" that carve out their own space in the market, and the best creative minds are likely to strive toward these kinds of inventions. But most of the time, innovation occurs incrementally and cumulatively -- with collaborators working together to build on what has come before. Given this reality, it's crucial for companies developing combination products to understand and protect their intellectual assets; doing so is just as important an exercise as developing the expertise and systems needed to successfully bring products to the market.
To stay abreast of all the factors that affect IP strategy, it is critical that combination product developers take advantage of new opportunities to learn and network in this burgeoning industry. PharmaMedDevice, the first conference and exhibition dedicated to advancing the combination products market, April 24-26, 2007, will feature a conference session entitled "Protection of Intellectual Property" as part of an entire track dedicated to "Partnership and Collaboration." This targeted education will not only help companies gain leading edge insight on keeping IP safe, but it will also provide them with new opportunities for partnership.
Michael R. Bielski, Senior Associate, ipCapital Group, Inc.
Michael R. Bielski is a Senior Associate at ipCapital Group. Since 1998, ipCG has maximized financial results for companies that seek to develop and execute intellectual property (IP) strategies, strengthen and monetize IP portfolios, and establish and implement Intellectual Asset Management (IAM) practices. Michael's practice focuses on the development and implementation of IP strategies for companies of all sizes, with particular attention to how medical technology companies can increase valuation using IP. Michael received a J.D. from Syracuse University College of Law, a M.S. in Neuroscience from Syracuse University, and a B.S. in Biology from SUNY Stony Brook. He can be reached at (802) 872-3200 x255 or mbielski@ipcg.com.
Michael R. Bielski
Senior Associate, ipCapital Group, Inc.
400 Cornerstone Drive, Suite 325
Williston, VT 05495-4046
Tel: 802-872-3200 x255
Fax: 802-288-9468
Email: mbielski@ipcg.com
Christine M. Ford, Event Director, PharmaMedDevice
Christine M. Ford is Event Director of PharmaMedDevice. Since joining Reed Exhibitions in 1991, Ford has been involved in a variety of conference and event management positions within a range of event portfolios including technology, life sciences, and manufacturing. Ford served as Reed Exhibitions' Director of Business Development from 2000-2005, working on a variety of launch and acquisition projects. Since 2004, Ford has focused the majority of her business development work within the life sciences and healthcare industries, including the PharmaMedDevice launch. Ford holds an MBA from the University of Connecticut and a BS from Fairfield University. She can be reached at (203) 840-5391 or cford@reedexpo.com.
Christine M. Ford
Event Director, PharmaMedDevice
Reed Life Sciences
383 Main Avenue
Norwalk
CT 06851
Tel: 203-840-5391
Fax: 203-840-9391
Email: cford@reedexpo.com