- Biotech freedom to operate (FTO) issues are common; resolution can be complicated and have a protracted timeline.
- FTO risk will be assessed by a suitor during diligence. Significant issues could impact their estimate of product value.
- So what can a biotech do early on? Consider engaging patent counsel to develop a smart, balanced cost:benefit approach.
Biotech FTO issues are common and resolution timing can be protracted.
- Because of the nature of biotechnology and biotech patent law, patents can grant which create FTO issues for competitors.
- Resolution of issues in the US, often by patent litigation, can take a really long time:
- US litigation often doesn’t start until around the time a drug is approved.
- Once started, litigation can be drawn out for several more years after approval.
So, if diligence by a biopharmaceutical company occurs before your drug is approved, it is likely taking place when FTO has not yet resolved.
What is assessed during due diligence? How could FTO risk impact product value?
The party looking at a potential acquisition or partership will assess FTO on your products by considering:
- Which granted patents are relevant? Also, do any pending patent applications have relevant claims which could grant?
- Who controls those patents and applications?
- When do they expire?
- How likely could they be invalidated in patent challenge proceedings?
- What kind of royalty could be negotiated in a patent license or what kind of infringement damages could be court-awarded?
- What is the likelihood the patent owner could obtain an injunction to keep your product off the market?
If the suitor determines there are FTO risks which could lead to a liability of significant royalties, damages or injunction, then they may discount the value of the opportunity.
So, resolution is complicated and in the distant future. What can a biotech do now?
The upsides of engaging patent counsel to conduct an FTO assessment:
- If risks are identified early, then there is an opportunity to modify your technology to avoid the patents or take other steps for an early resolution.
- Identifying the key patent risks provides the opportunity to challenge some patents when they grant. For example, the European patent opposition procedure is very useful, but challengers must file within 9 months of patent grant notice.
The downsides:
- Costs can become very expensive, especially if the technology is complicated.
- There is no guarantee that the analysis will reveal risk-mitigation options.
So, consider engaging patent counsel to develop a smart, balanced cost:benefit approach:
- Prioritize the key components of your technology/invention.
- Do the assessment early enough so that modifications can be adopted to avoid the patents (designing around) and deadline-driven patent challenges can be filed.
- If multiple options exist for some component of your technology, the older option might be preferred if its patents will expire sooner.