BACK TO THE O.K. CORRAL – SHOULD PROFESSORS MANAGE IP LICENSING?

Posted on January 13, 2010 by Warren Woessner

Last summer, Bob Litan and Lesa Mitchell of the Kauffman Foundation sent a short memo to Esther Lee at the Dept. of Commerce entitled “Accelerating the Commercialization of Government-Funded University-Based Research.” Although the Foundation, based in Kansas City MO, has been interested in university tech transfer at least since 2003 when it issued a report “Accelerating Technology Transfer & Commercialization in the Life & Health Sciences” (PDF at end of posting), this memo attracted little attention until, in December, The Harvard Business Review named it as containing one of the “Ten Breakthrough Ideas for 2010.” The alleged breakthrough is the proposal in the memo that, while universities will continue to own inventions made with Federal funding, professors should be free to not use their university’s technology transfer office (TTO), but to have the option of licensing their inventions through whatever agency they prefer. The Kauffman premise, to put it bluntly, is that most TTOs are “suboptimal” and that professors would be better off, in many cases, shopping their technology to faster-moving licensing entities (of some sort). The stated goal is to speed up the commercialization of new technologies while allowing universities to collect the same royalties as under the current system.

So the Kauffman team feels that there are lots of professors with under-appreciated technologies who would benefit by being able to leave the corral of their institution’s TTO and ride off, if not into the sunset, into the arms of a third-party licensing entity who would make the translational connection needed to get the technology “from bench to bedside.” Really?

To begin with, it is difficult to see how this would work in practice. The Kauffman memo suggests that the professor might have the option to prevent the TTO from even trying to license the technology while he or she shops it. Or will we now have dueling TTOs trying to license the same technology? (The memo suggests that a professor with an automotive invention who lives in, say, Kansas might want to use a TTO in Detroit.) And what will prevent third-parties from taking most of the licensing royalties? The memo mentions ownership, but it does not seem to consider who will pay for the patent costs, especially if a statutory bar date looms. A system in which the professor’s TTO is paying the patent costs while the professor is out trying to license the IP portfolio via a different organization is difficult to imagine. And about conflicts of interest….

The Kauffman fellows seem to have no sense of the chaotic history of tech transfer prior to Bayh-Dole (BD) (or in its early years). When I was doing patent prosecution at a big IP firm, one client I was given was a professor from a prestigious university that did not have a tech transfer policy. Since he was free to do what he wanted with his new method of cancer treatment pre-BD, he had paid the firm to file applications on it, and eventually licensed them to big pharma for a lot of money (in those days). The university got nothing at all. The first talk I ever gave was about the BD Act and the audience was professors, not administrators.

Also, there were a number of “for-profit non-profit” entities gathering up loose technologies from universities without technology policies (let alone TTOs). Research Corp. Technologies (RCT) was one of the most successful. RCT would not take on a technology unless it could get an assignment (not a license) from the inventor(s) and institution(s) in question (if the university even asserted any ownership rights). RCT would then front all the patent costs and attempt to license the technology. If it was successful, the inventor(s), and sometimes the institution (if it cared), would get some of the royalties. Before the rise of TTOs that developed their own licensing expertise, RCT and other organizations like it scored some major tech transfer homeruns, but they could only handle so many proposals at once. BD has been referred to as an “unfunded mandate,” but it did motivate universities and other institutions getting NIH and other Federal funding to step up to the plate and swing, at least at the fat pitches.

There are still a few lone wolves out there trying to make it as “hired guns” (pardon the metaphors). Believe it or not, I am still approached by small companies that want to file on inventions brought to them by university professors who are either unaware that their universities have TTOs (or at least tech transfer policies) or think they can ignore them. They can’t. The present system is not “optimal,” but at least it is organized. A few years ago, a prominent researcher told me that his colleagues used to look down on him because he was patenting his discoveries and licensing them (often to start-ups). He was using a TTO, incidentally. He said that today it is the professors who are not patenting and licensing who are considered to be out of step. I don’t believe that there are hoards of break-through technologies languishing in dusty lab notebooks in academe and, if there are, I don’t believe that loosing professors trained in life sciences to bring them to market is going to change anything for the better.

TechTranPanel_Report.pdf

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Privilege Primer

Posted on January 8, 2010 by Warren Woessner

Guest Posting from Ron Shutz

Case: Keefe v. Bernard, 2009 W.L. 346738 (Oct. 30, 2009).
Topic: Corporate Attorney/Client & Work Product Privilege

Facts

The attorney representing both the doctor and his corporate employer in a medical malpractice action interviewed an orthopedic surgeon also employed by the corporation. The plaintiff sought discovery of a report the defendants’ attorney prepared summarizing the interview. The trial court ordered it produced despite the defendants’ claim of attorney-client privilege. In an interlocutory appeal, the Iowa Supreme Court addressed the first impression corporate attorney-client issues the case presented. The Court held that communications between an attorney representing a corporation and a corporate employee are only protected by the attorney-client privilege if the discussions cover the employee’s actions as they relate to the potential liability of the corporation. Here, the report revealed that the surgeon was interviewed solely as a witness to the events at issue. The Court held such discussions are not attorney-client privileged. However, the Court found that the report was attorney work-product privileged because it showed the attorney’s mental processes. Though protected material, the defendant was required to turn the report over to the plaintiffs as a sanction for defendant’s failure to notify plaintiffs of the interview as required by Iowa law. In order to protect disclosure of the attorney’s opinion work (which the Court noted “is for all practical purposes, immune from discovery”) the Court ordered the report redacted to disclose only the facts, information and statements attributable to the surgeon.

BuLITS Points

• As a general rule, when an employee discusses with company counsel his or her own actions relating to the potential liability of that company, those communications are protected by the company’s attorney-client privilege.

• Depending on the law of the jurisdiction, if an employee is interviewed by corporate counsel and provides information as a witness to the actions of others, those communications may not be protected by the attorney-client privilege, but could still be protected as attorney work product.

To avoid possible sanctions, counsel should ensure there are no statutory limitations or ethical prohibitions before interviewing or deposing a witness.

And Remember

There are two layers to the attorney work product privilege. An opponent might be able to get at relevant non-privileged information embedded in your work with a demonstration of substantial need or undue hardship. But (unless something far worse has occurred) your mental impressions, conclusions, opinions, or legal theories should never face such a disclosure.

www.rkmc-bulits.com
www.rkmc.com

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You Say Tomato . . . I Say Tah-mah-to . . . Hewlett-Packard Company v. Acceleron LLC

Posted on December 28, 2009 by Warren Woessner

Authored by Ronald J Schutz of Robins Kaplan Miller & Ciresi LLP

The Federal Circuit says: “declaratory judgment jurisdiction,” even if the patent holder’s notice letter waltzes around

phrases like “infringement” or “assertion.” In Hewlett-Packard Company v. Acceleron LLC, the patent holder sent a letter that avoided using those phrases while still implying the possibility of litigation. The Federal Circuit said a patent holder cannot escape creating declaratory judgment jurisdiction simply by dodging certain words or phrases. Here, patent holder’s actions were “definite and concrete” enough to create a “substantial controversy.” Accordingly, the Federal Circuit reversed the district court’s determination that it lacked subject matter jurisdiction and remanded the claims for declarations of non-infringement and invalidity for further consideration — making it too late, presumably, for the patent holder to say “Let’s call the whole thing off.”

In Hewlett-Packard, a patent holding company owned the patent at issue. Within three months of acquiring the patent, the patent holder sent Hewlett-Packard a letter identifying certain HP products potentially impacted by its patent rights. The patent holder imposed a two-week deadline for execution of a letter agreeing, among other things, that Hewlett-Packard would not initiate litigation during negotiations. In response, Hewlett-Packard requested that the parties enter into a mutual no-litigation “standstill” agreement for 120 days. The patent holder refused and Hewlett-Packard filed its declaratory judgment action. Weighing the totality of the circumstances, the district court found that “the litigation was too speculative a prospect of support declaratory judgment jurisdiction.”

The Federal Circuit disagreed and specifically relied on MedImmune to reach its decision. While recognizing that the decision lowers the bar for what constitutes a justiciable controversy, the Federal Circuit said MedImmune nonetheless requires that a patent law declaratory judgment plaintiff demonstrate a dispute that is both “definite and concrete” and “real and substantial.” Not every fact pattern will rise to the necessary level of “a substantial controversy” and an objective review of the relevant facts is required. Necessary factors to be reviewed include consideration of whether the patent holder is a holding company or a competitor of the putative infringer, the patent holder’s history of enforcing the patent, the specific language used in any communications including their tone and implication and the status of relevant product lines and product plans. The Federal Circuit focused on the fact that the patent holder here was a patent holding company who, in response to the putative infringer’s answering letter, failed to agree to a confidentiality agreement or a mutual standstill of litigation that would have allowed the parties to engage in negotiations without litigation.

Either (or eye-ther), after Hewlett-Packard, regardless of what patent holders say, they most likely won’t be able to dance their way out of declaratory judgment jurisdiction if the reviewing court discerns an implied threat of litigation. Neither (nye-ther) should patent holders set overly burdensome conditions or precursors to further negotiations lest those demands become the evidence of a real dispute or controversy. Patent holders will also have to evaluate the use of “file, but not serve” rules in order to protect their chosen forum, but still engage in negotiation prior to full scale litigation.

Clearly, patent law declaratory judgment jurisprudence continues to evolve after MedImmune (leaving litigants on both side ample opportunities to argue that their unique facts should control). Still, no matter how you say it, after Hewlett-Packard, effectively initiating patent licensing negotiations while avoiding creating declaratory judgment jurisdiction remains patent law’s current hot potahto.

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TOP BIOTECH STORIES OF 2009 – DON’T FORGET STEM CELL RESEARCH

Posted on December 28, 2009 by Warren Woessner

The lists of the top pharma/biotech stories for 2009 that I have been seeing online focus mostly on the rise of biosimilars, the spate of mergers and the plurality of Hatch-Waxman litigations that have grabbed the headlines almost daily, along with the policies of the new PTO Director and attacks on gene- and business-method patenting.

Let’s not forget one major policy shift that President Obama initiated early in the year that may do more for the health of our citizens than the gut-shot health care reform bill stumbling toward further compromise. On March 9, 2009, President Obama signed Executive Order 13505 that lifted a more than eight-year ban on Federal Funding for research on embryonic stem cells.

Prior to the order, U.S. researchers could conduct research on ESCs with private funds, but this research had to be strictly segregated from any resources made available by the feds. In other words, an instrument bought with private funds could not be set on a lab bench built with federal funds. This problem is not entirely remedied by the Executive Order since Congress continues to attach an amendment to general funding bills that prohibits the use of federal funds to destroy or harm human embryos. In other words, researchers can now use ESCs, but they can’t make them from scientific scratch.

Still, this is an important step forward to enhance the ability of U.S. researchers to contribute and complete in this new and increasingly promising area. In August, the NIH issued guidelines which it will use in deciding if grant applications for stem cell research are fundable, and in approving ESC lines not previously approved for use in research. The stem cells must have been derived from embryos in excess of clinical need for in vitro fertilization, they must be voluntarily donated by the “parents,” and not bought or sold. Also, the human embryos cannot be the result of cloning experiments. See, Stem Cell Information.

In early December, NIH approved, inter alia, the use of 11 cells produced at Harvard using private funding. This is significant, since there are an estimated 700 ESC lines in the worldwide research community, and research on most of them may well be fundable now. Reports of phase I/II clinical trials using ESCs to treat a wide range of mostly hopeless conditions are frequent already. A very recent news story reported that a Scottish researcher plans to use ESCs in an attempt to treat stroke victims. Let’s hope that executive order 13505 and the NIH regulations open the floodgates for both new business opportunities and, more importantly, new hope for the new year.

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