Chapter 3: Medical technologies: the innovation dimension

D. Intellectual property rights in the innovation cycle

Following the introduction to IPRs in Chapter II , Section B.1, this section looks at the impact of IPRs on innovation in the pharmaceutical sector, with a particular focus on patent-related issues. After having set out the interdependence of the international, regional and national framework, and the importance of choices made with respect to the management of IPRs, questions related to patentability in the pre-grant phase are then analysed, as well as issues related to the use of patents in the post-grant phase. To round up the section, an overview of issues regarding FTO is provided.

1. The role of international and national norms and IP management

While the international legal dimension of IPRs is critically important to the medical innovation ecosystem – and has garnered much attention in policy debate – it is essential to consider the various layers of IP law and policy which ultimately influence the directions that research takes. TRIPS provisions, for instance, can be understood as part of the interplay between international and domestic law and policy frameworks. Policy measures with bearing on medical technologies range from the strategies of individual projects to the standards of international law:

• General policies and strategies for management of IP at institutional or project level, whether within the private sector, the public sector or the philanthropic sector, and including practical choices such as whether or not to file for a patent, and, if so, where; and how to exercise the ensuing rights.
• National innovation policy settings, including targeted incentive initiatives, and policies for the management of publicly funded medical research.
• National legislative settings, including IP laws and their interaction with other aspects of the regulatory system, such as competition policy and regulation of medicines.
• International cooperation on public health and specific international initiatives, including on neglected diseases research.
• The international legal framework, comprising a complex of so-called “hard law” and “soft law” instruments and standards spanning trade and investment, IP, public health, human rights, bioethics and related areas.

Consequently, while international legal standards can have a major impact on innovation systems (e.g. in requiring pharmaceutical inventions to be patentable), the choices made at regional and national level within the international legal framework can be possibly equally, if not more important (e.g. in determining and applying specific patentability criteria under national law). Similarly, the choices made by a public-sector research programme or a private-sector company regarding the management of IP can have a more immediate impact on R&D outcomes. These choices for IP management are often shaped by overall innovation structures, such as those discussed in Section B.4(e) above.

2. Intellectual property and the product development process

An overview of relevant IP issues that arise at each stage of the product development pipeline can help to clarify the linkages between specific issues and choices within a narrower operational context, and the overarching policy objective of improved public health outcomes. Table 3.3 sets out these issues. Each of these is not a narrow “technical” question that can be considered entirely in isolation. Rather, the successful development and diffusion of a new technology is a consequence of the combined impact of choices taken at each of these steps.

The debate on the value and practical impact of the patent system, in particular, in delivering needed medical technologies has highlighted two key points.

• First, patent law is not a stand-alone innovation system. It is only one element of the innovation process, and one which can be deployed differently in diverse innovation scenarios. Patent law has little bearing on many other factors that lead to the successful development of technologies, e.g. the nature and extent of demand, commercial advantages gained by marketing and ancillary services and support, commercial and technical viability of production processes, and compliance with regulatory requirements, including through effective management of clinical trials data.
• The role of the patent system in developing a new medical technology depends not only on legislative and regulatory settings, but also on a variety of choices made by individuals at different stages of the development process as to whether and when to obtain patent rights, and how to exercise them. They may rely on exclusive commercial positions, or may draw from a range of nonexclusive and open licensing structures, waivers of rights and specific non-assertion undertakings. Notably, in the case of not-for-profit initiatives in public health, these approaches are not necessarily aimed at securing financial advantages. Instead, they are aimed at leveraging access to complementary technologies.

Patents do not have the same importance to all industries. In addition, they have quite different impacts on markets, as is illustrated by the comparison between the medical devices industry and the pharmaceutical industry (see Table 3.4).

3. Pre-grant issues: questions of patentability

This section considers selective aspects of patent law that are especially relevant to the innovation dimension of medical technologies.

(a) Patenting material that exists in nature

While modern biotechnology plays an increasing role in pharmaceutical R&D and production, patents have been granted on biotechnological inventions since the 19th century.¹ For instance, German patent DE 336051 was granted in 1911 to Friedrich Franz Friedmann on the production of a therapeutic against TB involving the continued vaccination of tubercle bacilli obtained from turtles.

 

The maturing of genetic engineering has been accompanied by an intense public debate about the desirability and appropriateness of applying patent law to modern biotechnology. Important legislative and administrative steps have been taken to clarify some of these issues, such as Directive 98/44/EC of the European Parliament and of the Council on the legal protection of biotechnological inventions³ and the United States Patent and Trademark Office (USPTO) revised Guidelines For Determining Utility Of Gene-Related Inventions of 5 January 2001.⁴ Some jurisdictions require that the function of a gene needs to be clearly identified and to be related to the claimed part of the gene sequence. For example, Section 1a(3) of the German Federal Patent Act stipulates: “The industrial application of a sequence or a partial sequence of a gene shall have to be specifically disclosed in the application by indicating the function fulfilled by the sequence or partial sequence”. In relation to gene sequences, Swiss patent law limits the exclusivity rights stemming from the patent to those parts of the gene sequence that are strictly necessary to fulfil the functions described in the patent (Article 8c Swiss Patent Law).

A 2001 WIPO survey⁵ provides information about national legislation of WIPO member states related to the protection of biotechnological inventions under patent and/or plant variety protection systems, including information as to which countries might admit the patenting of genes, cells or plant varieties.

One specific biotechnology patent law issue that is relevant to pharmaceutical production relates to the patentability of material existing in nature or in synthesized or extracted chemical compounds, particularly if they are identical to a compound that already exists in nature. A distinction is made between a naturally occurring compound and an artificially extracted and isolated compound. The latter is considered to be a new entity and patentable subject matter in some jurisdictions.

(Parke-Davis& Co. v. H. K. MulfordCo., 189 F. 95, 103, District Court, Southern District of New York, 1911).

While in many cases, patentability criteria are successfully applied by patent law practice and by the courts to determine the patentability of biotechnology inventions, two cases in US courts illustrate that controversy continues (see Boxes 3.13 and 3.14).

(b) First and second medical indications

It should be noted that all other patentability criteria under the EPC must be met before a patent on a known substance for a new medical use can be granted. The European Patent Office Enlarged Board of Appeal clarified that: “where it is already known to use a medicament to treat an illness, Article 54(5) EPC does not exclude that this medicament be patented for use in a different treatment by therapy of the same illness”.¹³ This means that a known substance – if it meets the general criteria for patentability – can be patented for use in a different treatment for the same illness. Such a secondary use patent, however, does not extend the patent protection covering the already known medical use.

The case of fluoxetine as a secondary use patent illustrates how prices can differ widely for the same product used to treat a different medical use (see Box 3.15).

The patentability of secondary indications is a matter of debate, and therefore exemplifies the continuing challenge in patent law of balancing access against innovation. On the one hand, opponents of secondary use patents argue that such patents impede access to medicines, reward uninventive activities and unnecessarily prolong effective patent protection for a certain medical substance. On the other hand, proponents express the view that an additional medical use can itself be inventive, and that the development and clinical testing of a second use is no less in need of incentives than the first use, and in some cases may be more therapeutically valuable than the first use.

Some guidance about when the European Patent Office (EPO) grants patents for a second medical indication can be obtained from the guidelines for patent examination of the EPO.¹⁴

(c) Incremental and adaptive innovation

Patents can be granted on incremental innovations if they meet the patentability criteria. The application of the inventive step/non-obviousness criterion¹⁵ has implications for incremental innovation. Incremental innovation can improve the safety, therapeutic effect or method of delivery of an existing medicine or vaccine, or improve the efficiency with which it can be manufactured, with positive outcomes for public health.

(i) Examples of incremental innovation

Frequently, the first approved formulations of a drug are followed by changes in the formulation or route of administration that improve the effectiveness of the treatment. These incremental innovations include, for example:

• New dosage forms which increase compliance: Controlled-release formulations, which permit a single administration per day or even per week (as opposed to multiple administrations), can increase compliance due to decreased frequency of administration as well as a more stable drug level and decreased side-effects. There are many such examples. They include oral formulations for sustained delivery of antibiotics, injectable sustained-release formulations of hormones, topical sustained release formulations for hormones, among others. New dosage forms which increase compliance also include sublingual or rapid-dispersion tabs, which are easier to take than capsules and give a more rapid effect. Sublingual benzodiazepines are an example of one such dosage form.
• New dosage forms with improved efficacy: Frequently, the addition of an additive or a second active ingredient can improve the efficacy of a drug to treat a specific ailment. These can be taken separately as two drugs. However, combining them improves effectiveness since dosage compliance is assured. Packaging and prescription are also simplified. There are numerous examples of new dosage forms with improved efficacy, such as the inclusion of corticosteroids with antivirals, and the coformulation of antiretroviral drugs.
• New formulations with improved storage characteristics: Reliance on the cold chain is a barrier to access for many drugs which lose their activity when stored out of the cold chain. Numerous second-generation products with improved heat stability (or simply decreased storage volume) are easier to ship and to store, enabling access in resource-poor settings. Examples include vaccines that can be stored in a fridge rather than a freezer (oral polio vaccine, nasal influenza) and oral drugs that can be stored at room temperature.
• New routes of delivery: Many drugs are first approved for administration by injection, a route which limits ease of access. Alternative routes of administration (e.g. oral, nasal, topical patch) are then developed, thus greatly simplifying ease of administration, access and effectiveness. Examples include oral forms of antibiotics, nasal vaccines, among others.

Other incremental innovations related to a known, approved drug can have a significant impact on effectiveness. For example, improved processes for production can decrease the cost of manufacture. Improved processes for purification can decrease the contamination of the drug with residual potentially toxic substances.

(ii) Patent clusters and evergreening

Concerns have been raised that the patent clusters around an existing medicine, that is patenting of new forms or other minor variations of existing products that have no additional therapeutic value and display limited inventiveness, can be used to prolong patent protection in an inappropriate manner, thus creating a negative effect on access to medicines, as well as on further innovation – a strategy referred to as “evergreening”. The Commission on Intellectual Property Rights, Innovation and Public Health (CIPIH) defined evergreening as a term popularly used to describe patenting strategies “when, in the absence of any apparent additional therapeutic benefits, patent holders use various strategies to extend the length of their exclusivity beyond the 20-year patent term” (WHO, 2006b).

The European Commission has identified the creation of “patent clusters” by filing numerous additional patents for the same medicine as a common strategy employed by pharmaceutical companies. Companies reportedly file a significant number of these additional patents on variations of the same product, especially for blockbuster medicines, very late in the life cycle of a medicine, when the main patent is about to expire.¹⁶ The Commission found that these patent clusters make it more difficult for generic competitors to evaluate whether they can develop a generic version of the original medicine without infringing one of the numerous patents filed around one medicine. The number of patents also increases the risk of potentially costly litigation for generic companies.

In reviewing the evergreening debate, the CIPIH commented that “demarcating the line between incremental innovations that confer real clinical improvements, therapeutic advantages or manufacturing improvements, and those that offer no therapeutic benefits is not an easy task. But it is crucial to avoid patents being used as barriers to legitimate competition”. The CIPIH recommended that governments “take action to avoid barriers to legitimate competition by considering developing guidelines for patent examiners on how properly to implement patentability criteria and, if appropriate, consider changes to national patent legislation”.¹⁷

The central issue is: when does an adaptation or modification of a first patented invention itself become separately eligible for a patent? In this respect, it is important to judge every individual invention claimed in a patent on its merits. The mere fact that an innovation is incremental is not a ground for refusing the granting of a patent. In fact, most innovation is incremental by nature since technology normally progresses in incremental steps. In order to distinguish inventions that meet the inventive step/non-obviousness criterion from others that do not meet the criterion, patent law and practice have developed and established patentability criteria that need to be met before a patent can be granted.

Some health policy-makers argue that therapeutic efficacy should be used as an additional criterion to prevent evergreening and that patent protection for incremental innovations should be granted only if the invention provides sufficient additional therapeutic benefits. While the therapeutic value of a product as such is not a patentability criterion in most jurisdictions, therapeutic advantages over what exists in the prior art¹⁸ may be considered when determining inventive step. Furthermore, any intention behind patent grant – for example, to build a defensive layer of additional patents to be used against competitors – is not a relevant criterion in the granting procedure. Post-grant measures such as exceptions and limitations, and the regulation of licensing practices, can be applied to deal with undesirable effects of validly granted patents. Thus, a patent must be available if the patentability criteria of novelty, inventive step, and industrial applicability are met.

In the context of a patent system, and to the extent that the evergreening debate concerns the grant of patents (rather than how patent rights are exercised by patent holders), the debate can be considered from two angles:

• How are the patentability criteria defined by the relevant national law and interpreted by case law and practice? Many countries have revised their legislation to adopt different types of measures. Section 3(d) of India’s Patent Act 1970 (see Box 3.16) and Section 22 of the Philippines’ Intellectual Property Code are two examples of a narrow definition of patentability criteria. Countries apply different approaches, however, and various definitions and practices exist in the granting of patents to pharmaceutical inventions (e.g. for claimed inventions relating to second medical use, dosage regimes etc.).
• How are the patentability criteria applied by examiners in a consistent manner that is in line with the established definition and interpretation? Some patent offices have set up search and examination guidelines as instruments to support the examiners’ work with a view to ensuring high quality of granted patents. Such guidelines need to be regularly revised and maintained. WIPO has published a collection of links to a range of patent offices’ guidelines for easy access to this information.¹⁹ Argentina adopted guidelines for patent examiners along similar lines as the Indian Section 3(d) of India’s Patent Act 1970 in May 2012.²⁰ In addition, patent offices need to regularly train examiners, maintain a supportive infrastructure (e.g. prior art databases).

One question that has been raised is whether this task of ascertaining whether incremental innovation that otherwise meets the criteria for patentability offers therapeutic benefits or deters competition should be assigned to patent offices or would better be done by competition or health authorities (Yamane, 2011).

Leaving aside the question of patentability, it must be noted that the granting of a patent on an incremental improvement of a pharmaceutical is independent from the granted patent of the original product. Specifically, it does not extend the patent term of the earlier patent. While the improved form of the medicine will be covered by the new patent, the patent protection of the original version will end with the expiration of the first patent.

(d) Patent filing strategies in the public and private sector and the exercise of patent rights

Apart from the provisions of the national or international law and their interpretation by the courts, the patent filing strategies of applicants could determine the innovation and imitation landscape for medical technologies. Filing a patent application involves a series of decisions regarding the specific invention(s) for which patents are to be sought, for what practical purpose, in which jurisdictions, in whose name, with whose funds and when.

Factors determining whether or not a patent application is filed may range from whether the technology is a better solution than any currently available options, to the size of the potential market for the technology, or the likelihood of competition. For public-sector researchers, notably in the field of public health, considerations tend to be focused on concerns about how the decision to patent or not the technology would advance the institutional or policy goals of their particular research establishment, and whether a patent would help secure suitable partners for downstream product development. The capital requirements needed to further develop the technology into a medical product must be considered, including the need to license in any other proprietary technology, the cost of satisfying any regulatory requirements, and the prospects of attracting investment or partners to finance or co-develop these requirements if they cannot be met in-house.

From the inventor’s perspective, patent protection may not be the best strategy if secrecy can be maintained and the technology cannot be reverse-engineered. Similarly, patenting would not be the best strategy if competitors were able to easily develop alternatives to the patentedinvention (i.e. they could design around it) or it was likely to be difficult to ascertain whether competitors were using it without authorization.

Patent application filing strategies determine the countries or territories in which protection is to be sought. Fees must be paid for the grant and maintenance of each patent in each separate country or territory, which can be expensive, and may not be justified in markets where the patent is unlikely to be used. The Patent Cooperation Treaty (PCT) enables a single patent application to be filed with effect for all PCT contracting states. Since national processing of an application only takes place in the subsequent national phase, patent applicants can use the international phase to decide in which PCT contracting states they will eventually seek patent protection. According to a WIPO survey on Patenting Strategies carried out in 2009 and 2010 (WIPO, 2011b), when asked to compare 2010 with 2009, pharmaceutical industry respondents reported that they expected small increases in the growth rates in both PCT filings and filings in their home country. On the other hand, they expected to see large increases in growth rates for filings abroad.

Patent filing strategies can be offensive or defensive. An offensive strategy aims to leverage exclusive rights over a technology in order to extract economic returns either from exclusive use of the patented technology or from licensing arrangements. A defensive patent strategy is aimed solely at protecting the inventor or patent owner’s freedom to operate (FTO) using its own technology by avoiding a situation in which a competitor obtains exclusive rights to it. Equally, patent holders may publicly or formally waive patent rights, or grant a royalty-free licence, or declare that they will not assert certain patents once acquired in certain territories, for certain uses, or in general.²¹

There are differences between private and public patenting strategies. Private-sector entities – mostly publicly traded or privately held companies – aim to generate a return on their shareholders’ investment. In contrast, public-sector and public-interest entities generally conduct research and do not produce commercial products with the aim of serving a general or specific public interest. Instead, they focus on smaller portfolios of fewer patents which typically contain broader claims over key results of upstream research. These patents can be licensed to private-sector entities which have capacity to carry out additional R&D. This in turn may lead to delivery of products to the public, and at the same time, may generate revenue for public-sector entities.

Some countries have adopted policies to encourage research institutions and universities to take out patents based on inventions arising from publicly funded research. The best-known example of such a policy is the US Bayh–Dole Act of 1980. This policy has inspired the adoption of similar measures in other countries, such as South Africa’s Intellectual Property Rights from Publicly Financed Research and Development Act of 2008 and the Philippine Technology Transfer Act of 2009 (see Box 3.17). Such policies, and a general trend towards more active management of technologies created through publicly funded research, are leading to the steady accumulation of publicly held patent portfolios, including on key upstream technologies that provide platforms for a range of new medical technologies.

PDPs which focus on R&D for new products aimed at addressing neglected health needs may also have distinct patent filing and IP management strategies (see Chapter III, Section C.4).

4. Post-grant issues: questions related to the use of patents

Once a patent has been granted, certain legal and practical considerations determine how it actually influences and impacts on the development and dissemination of the patented technology. These include options for defining the legal scope of a patent rights, and approaches to licensing the rights granted under a patent. This section outlines several of these considerations most relevant to product development.

(e) Research tools

Patentable biotechnological inventions are not necessarily end products such as new drugs, but can be “upstream” research tools that are essential for the development of “downstream” pharmaceutical products. Research tools can be an object or a process for laboratory use. Where technologies comprise DNA sequences, genetic researchers often have no way to invent around them. For example, expressed sequence tags are tiny portions of an entire gene that can be used to help identify unknown genes and to map their positions within a genome. Polymerase chain reaction is a well-known research tool or technique used to amplify small segments of DNA. Broad patenting of these types of inventions may disadvantage those wishing to use them to develop other products, while narrower claims may facilitate their downstream use.

It is for these reasons that Switzerland, a country with a substantial research-based pharmaceutical industry, has introduced a right to a non-exclusive licence with regard to the use of research tools, for example, for cell proliferation in the field of biotechnology.²³

(f) Research exception

A research exception or experimental use exception is one of the most commonly used types of “limited exceptions” to national patent laws pursuant to Article 30 of the TRIPS Agreement. A WTO Dispute Settlement Panel has defined the term as “the exception under which use of the patented product for scientific experimentation, during the term of the patent and without consent, is not an infringement”.²⁴ Many countries provide varying levels of exceptions for acts carried out for experimental purposes or scientific research. A WIPO Committee on Development and Intellectual Property report identifies 98 instances.²⁵ Some countries limit the exception to acts carried out without commercial or gainful intent. This exemption enables researchers to examine the patented inventions and to research on improvements without having to fear that they are infringing the patent. In general, the research exemption applies to research on or into a patented invention, for example, working on the patented invention in order to explore unknown effects or further develop the invention. Many countries do not apply the research exemption to research made with the patented invention, which is what, for instance, downstream researchers do when they conduct genetic research with patented research tools.

For example, under Swiss patent law research for commercial or non-commercial purposes is allowed as long as the research objective is to generate new knowledge about the patented invention (Article 9 G b of the Swiss patent law).²⁶ Brazilian patent legislation exempts acts carried out by third parties without the consent of the patent owner for experimental purposes in connection with scientific or technological studies or research.²⁷ The Bangui Agreement provides that “the rights deriving from the patent shall not extend ... to acts in relation to a patented invention that are carried out for experimental purposes in the course of scientific and technical research”. One study has taken the view that, in the absence of any qualifying language, the provisions of these instruments would provide a safe harbour against patent infringement for virtually all scientific and technology research activities.²⁸

Other jurisdictions have recognized research exemptions subject to certain limiting factors. For example, in the United States, the United States Court of Appeals for the Federal Circuit held in Madey v. Duke University²⁹ that using a patent without the consent of the patent holder in order to further the “infringer’s legitimate business interests” was to be considered patent infringement. Some other national patent laws distinguish between research and experimentation for commercial and non-commercial purposes.

Replies to a questionnaire from WIPO member states and regional offices provide information on various national practices regarding the experimental use and scientific research exceptions.³⁰

Where the general research exception is not wide enough in a particular jurisdiction to allow particular follow-on research, such as use of a patented research tool, the researcher needs to obtain a licence on terms to be mutually agreed. Alternatively, compulsory licensing may allow such downstream research, subject to compliance with the requirements under the applicable national law.³¹

(g) Licensing and assignment with respect to innovation

Frequently, a patent owner lacks the resources to exploit an invention and to scale up from laboratory research stage to bring a product to market. The resources required: to develop a product include the skills, facilities and capital to conduct further research; to carry out tests, trials and production engineering; to obtain regulatory approval; and then to manufacture, to market and to distribute the final product. The ingenuity and competitive edge of an invention alone are not sufficient to assure its successful implementation. In this situation, a public-sector or private-sector patent owner must consider whether it is in its best interests to assign the technology, or to license it to another party who can develop it. Each choice offers different degrees of control over the technology and may yield different levels of return and health benefits.

A patent assignment may include sales, or transfer free of compensation, such as to a PDP. An assignment entails a loss of control over the technology. In general, an assignment at an earlier stage of R&D offers a lower return to the assignor than at a later stage, as the assignee is typically assuming greater uncertainty and risk. The assignor may assume obligations to provide technical advice for a certain period.

Patent licences vary in scope. An exclusive licence guarantees that the licensee will have no competition in the production and distribution of the given product, not even from the licensor. Licences can be restricted to a particular territory, and can allow or prohibit sub-licences. A non-exclusive licence allows the licensor to grant other licences to other parties in the contractual territory. Licences can also be restricted to particular fields of use. This allows a licensor to grant a licence to the same patent or related patents to different parties in different fields. Patents for medical technologies are often suitable for field-of-use licences because such technologies often have multiple uses. For example, the same technology can be applied to diagnostic and therapeutic uses with respect to the same disease or different diseases. Field-of-use licensing grants the licensor greater freedom to deal with the patent with other parties in other fields of use and extract greater returns. Licences can also include options to commercialize additional compounds or fields of use that could allow the licensee to integrate additional products in its pipeline. The return from a licensee to the licensor depends on the objective of the licensor and the licensee, the degree of exclusivity, size of contractual territory, restrictions on use, options included and the duration of the licence, as well as the value of the technology itself. Alternatively, technology can be voluntarily shared even without a formal licensing arrangement.

A licensing strategy covers an entity’s inputs as well as its outputs in the product development process. The strategy determines, in line with the entity’s overall objectives, what licensing models are to be pursued, and to what end. Public-interest IP management can promote innovation by granting licences on non-exclusive terms or, where exclusive licensing is necessary to promote further development, it can restrict the licensed field of use to reserve other areas of research that may use the same technology or all non-commercial uses.

(h) Patents in R&D agreements and other forms of collaboration

Medical technologies are developed through a diverse spectrum of forms of collaboration that have implication for access post patent grant. At one end of the spectrum, traditional public-sector research places all results in the public domain, where they are freely available for use by others involved in product development. At the other end of the spectrum is the conventional vertically integrated private-sector business model which involves conducting R&D in-house within a single company group, exercising exclusive rights to prevent its use by others, thus furthering the company’s own commercial interests. Increasingly, few pharmaceutical companies have the capacity to operate in a fully integrated and entirely exclusive manner.

In between these two extremes can be found new forms of commercial collaboration which combine different inputs in order to deliver a complex product such as a new drug or vaccine. In the field of biotechnology, there are frequently several different licensors and other right holders by the time the final product is ready for market. Patent rights can also be leveraged in other non-conventional ways, such as to enable access to improvements and developments of licensed technologies through open source or public health patent pools and also through commercial patent pools which enable competitors to develop products based on shared pre-competitive technology platforms (see the discussion of innovation structures in Chapter III, Section B.4(e) above).

(i) Patent thickets

There is no generally agreed definition of the term “patent thicket”. One author describes a patent thicket as a “dense web of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology” (Shapiro, 2000). In such a situation, multiple patent rights owned by different parties have to be considered by competitors as well as new entrants into a market within that field of technology. Eventually, they must negotiate multiple licence agreements, and this may present difficulties and impede the implementation of a project.

Patent thickets have been observed for complex technologies, such as information and communications technology (ICT), and for pharmaceuticals. They can arise in technical fields where a number of companies compete at the same level and where patent ownership is fragmented. Key issues that have been highlighted with respect to patent thickets include: the high density of patents potentially impeding R&D; high, possibly excessive, licensing costs; refusal of the patent holder to grant a licence; and difficulties associated with inventing around a patent (IPO, 2011).³²

Cross-licensing agreements have been proposed as a solution. However, some have argued that this measure could aggravate the issue, as it could induce competing companies to obtain larger numbers of patents in order to improve their bargaining capacity. Patent pools have also been suggested as a way to address transaction costs.³³

Empirical studies of patent thickets show varied results. One study found that, among academic researchers in the biomedical field, 3 per cent had abandoned a project during the preceding three years due to too many patents covering their particular research field. The study found that access to tangible research input was more problematic, as 20 per cent of academic-to-academic requests were refused.³⁴ Another study found that 40 per cent – including 76 per cent of those in the biosciences industry who responded to the survey – considered that their research was affected by difficulties in accessing patented technologies. Of these respondents, 58 per cent reported delays, 50 per cent reported changes in their research plans and 28 per cent had abandoned their research. The most common reason for changing or abandoning the research was overly complex licensing negotiations (58 per cent), followed by high individual royalties (49 per cent).³⁵

In the pharmaceutical field, a European Commission study has also used the term “patent thickets” to refer to a strategy adopted by originator companies to file multiple patents for the same medicine – a strategy that results in delaying or blocking the entry of generic medicines into the market (European Commission, 2009).

(j) Patent landscapes and medical technologies

The term “patent landscape” is used in this study to refer to a report about the search, analysis and illustration of the patent situation or patenting activity in a specific technology field according to predefined criteria and concrete questions. There is no commonly agreed definition of the term patent landscape, or of what such a report should contain. It may refer to a list of all patent applications/patents found, or to a more elaborate report that includes analysis and visualization.

The value of a landscape report is enhanced by visualizing its results and by conclusions derived from the empirical findings. Patent landscapes can therefore be useful for policy discussions, strategic research planning or technology transfer. However, they only provide a snapshot of the patenting situation at the time the search was carried out.

The first step in landscaping is usually a state-of-the-art search for patent applications/patents in the technological field of interest. The next step is normally to identify the relevant patent family members. The results are then analysed, for example to answer specific questions, such as those relating to patterns of patenting (Who files applications? What is filed and where?) or certain patterns of innovation (innovation trends, diversity of solutions for a technical problem, collaborations between researchers). Subsequent analysis of the findings may lead to various conclusions or recommendations.

Some landscape reports go further and look at the legal status of patent applications/patents, for example, whether applications have resulted in granted patents and whether such patents are still in force. However, landscape reports rarely cover legal status since this information is generally not easy to obtain, as it is not systematically collected and maintained in a single database.³⁶ Moreover, legal status is always subject to change. However, determining legal status is critical for a FTO analysis.

WIPO has compiled a list of patent landscape reports in various technical fields that have been published by international organizations, national IP offices, non­governmental organizations and private-sector entities.³⁷

(k) Overview of freedom to operate issues

Linked with the scope of patent landscape reports is the analysis of freedom to operate. This sub-section briefly sketches the issues involved in such an analysis.³⁸

(iii) Defining freedom to operate

Assessments of freedom to operate (FTO) are important in deciding whether to initiate, continue with R&D projects, use or market new products. An FTO assessment is based on a legal opinion on whether the making, using, selling, or importing of a specified product is free from potential infringement of third party IP or tangible property rights. Managers use FTO analysis when making risk management decisions in relation to R&D, product launch and commercialization. However, FTO does not mean an absolute freedom from any risk of infringing another party’s IP. It is a relative assessment based on analysis and knowledge of IP landscapes for a given product, in a given jurisdiction, at a given point in time.

(iv) Freedom to operate strategies

The decision to undertake an FTO analysis, and to commission an FTO opinion from legal counsel or a patent attorney, is based on a preliminary risk assessment. FTO considerations are relevant at all stages of the product development cycle. In practice, however, carrying out a detailed FTO analysis and legal opinion on every product or process early in the pipeline would be impractical. This is because the detailed specifications of the product could not be known to a sufficient degree of detail and certitude. On the other hand, obtaining any needed licences at a late stage in the development process runs the risk that either no licence would be obtained or that the conditions would be unfavourable and thus the bargaining flexibilities would be reduced. In addition, there could be a risk of becoming involved in a lawsuit for IP infringement.

Negotiating a licence is a straightforward way to obtain the consent of the right holder for the intended commercial activity. This approach may have the advantage of focusing on mutual interests in a deal in a way that proves beneficial for all parties. Licences may include additional information, such as know-how, regulatory data, trade secrets and trademarks. Agreements may include upfront payments, milestone payments or royalty rates, or a combination of all three, or they may be in the form of a cross-licence, whereby the licensees and the licensor grant each other certain rights. Licences may also include – and indeed frequently do – grant-backs for improvements, options on new inventions and the mutual sharing of new data. These options may be particularly relevant if long-term collaboration is sought and if further research has the potential to lead to improvements in the licensed/ protected technology.

However, licence negotiations may not always lead to the desired agreement, even if a potential licensee has made reasonable efforts to obtain a licence. In such situations, a compulsory licence is a route that could possibly be explored.³⁹

Instead of seeking a licensing agreement or a compulsory licence, another viable strategy could be to aim to have the “blocking” patent invalidated. The blocking patent may have been granted erroneously and could therefore be challenged and invalidated. However, going into litigation can be costly and lengthy, and the outcome is often uncertain.

An additional option would be to seek a nonassertion covenant in which a right holder confirms in a public statement that the rights will not be enforced under certain circumstances or in certain defined fields or geographies. Such agreements may be particularly relevant for “humanitarian” licensing aimed at responding to socio-economic needs. In addition, these agreements deliver the added benefit of ensuring that product liability issues are simplified. (Krattiger, 2007a)

Instead of pursuing available legal options, the company may adapt the project to the IP situation. One such option could be to modify the product in a way that no licence would be required. Such a strategy works if available alternatives exist and if the different options are analysed at an early R&D stage (i.e. when it may be easier to modify the product). The lack of alternative options may serve to incentivize further research to find a new solution for the project. Inventing around may delay product development but can lead to new inventions – and perhaps even better products – thus resulting in new IP for cross-licensing. On the other hand, inventing around may increase costs.

A review of available legal, research and financial options may lead to a decision to abandon the project. The alternative, electing to overlook existing patents and awaiting a choice by the patent holder whether or not to enforce their rights, could result in additional financial loss – particularly if there is a successful claim for damages based on knowing infringement.

Finally, FTO issues can also be resolved through mergers and acquisitions of competing companies.

The process of developing a sound strategy for securing FTO should consider all options, and decisions should be based on the assessment of the risks of each option in relation to the institutional context, product type, and market dynamics. In practice, several options are typically pursued concurrently.

An FTO opinion provides only a snapshot of the IP related to a product at a given point in time. The patent landscape changes as patent applications are filed, granted, expire or are invalidated. Therefore, strategies need to be regularly revised and tactics need to be adapted in response to changing circumstances.

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1. The issue of patentable subject matter is addressed in Chapter II, Section B.1(b)(iii). back to text

2. See www.globalmedicaltechnologyalliance.org/wp-content/uploads/GMTA_Patents_for_Medical_Devices_and_ Pharmaceuticals_Rev_FINAL_19_Mar_2012.pdf. back to text

3. Official Journal of the European Communities L 213/13 of 30 July 1998. back to text

4. USPTO, “Final Guidelines for Determining Utility of Gene-Related Inventions”, Press release, 4 January 2001. back to text

5. WIPO document WIPO/GRTKF/IC/1/6. back to text

6. The issue of novelty is addressed in Chapter II, Section B.1(b)(iii).  back to text

7. See www.comunidadandina.org/ingles/normativa/D486e.htm. back to text

8. See www.epo.org/lawpractice/legaltexts/epc.html back to text

9. See www.patentdocs.org/2012/03/supreme-court-remands­myriad-case.html back to text

10. See www.cafc.uscourts.gov/images/stories/opinions­orders/10-1406.pdf back to text

11. See www.patentdocs.org/2012/11/supreme-court-grants­cert-in-amp-v-myriad.html back to text

12. See www.supremecourt.gov/opinions/11pdf/10-1150.pdf back to text

13. G 0002/08 (Dosage regime/ABBOTT RESPIRATORY) of 19.2.2010. back to text

14. See www.epo.org/law-practice/legal-texts/html/guidelines/ e/g_vi_7_1.htm. back to text

15. The issue of inventive step/non-obviousness is addressed in Chapter II, Section B.1(b)(iii). back to text

16. See http://ec.europa.eu/competition/sectors/ pharmaceuticals/inquiry/. back to text

17. See www.ipmall.info/hosted_resources/crs/R40917_091113. pdf. back to text

18. For more information on prior art, see Chapter II, Endnote 67. back to text

19. See www.wipo.int/patentlaw/en/guidelines.html. back to text

20. Joint Resolution 118/2012, 546/2012 and 107/2012 (Ministry of Industry, Ministry of Health and National Industrial Property Institute) of 5 May 2012, published in Official Gazette of 8 May 2012. back to text

21. See Chapter IV, Section C.3(d). back to text

22. See www.wipo.int/wipolex/en/details.jsp?id=9605. back to text

23. Article 40b Swiss Patent Law, www.admin.ch/ch/d/sr/c232_14.html. back to text

24. See Canada – Patent Protection of Pharmaceutical Products (DS114). back to text

25. WIPO document CDIP/5/4 Annex II. back to text

26. See www.admin.ch/ch/d/sr/c232_14.html. back to text

27. UNCTAD/ICTSD, “The Research and Experimentation Exceptions in Patent Law: Jurisdictional Variations and the WIPO Development Agenda”, Policy Brief Number 7, 2010. back to text

28. Ibid. back to text

29. Madey v. Duke University, 307 F.3d 1351 (Fed.Cir. 2002). back to text

30. See www.wipo.int/scp/en/exceptions. back to text

31. See Chapter IV, Section C.3(a)(ii) and (iii). back to text

32. WIPO document SCP/12/3 Rev.2. back to text

33. Ibid. back to text

34. See www.nationalacademies.org/gateway/pga/3330.html. back to text

35. See WIPO document SCP/12/3 Rev.2; and http://sippi.aaas.org/survey/. back to text

36. See Chapter II, Section B.1(b)(ix). back to text

37. See www.wipo.int/patentscope/en/programs/patent_landscapes/index.html. back to text

38. This section is a summary of Chapter 14.1 “Freedom to Operate, Public Sector Research and Product-Development Partnerships: Strategies and Risk-Management Options” of the IP Handbook of Best Practices (Krattiger et al. (eds.), 2007), available at www.iphandbook.org/handbook/ch14/p01. back to text

39. For further explanations on compulsory licences, see Chapter IV, Section C.3(a)(ii) and (iii). back to text