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Guest Post: Biotechnology Patent Trolls

This is a guest post from the BiotechBlog Intern,  Fintan Burke. Fintan is a student at the School of Biotechnology at Dublin City University. Do you have a response to Fintan’s post? Respond in the comments section below.

According to a BDO industry report, a smallUS biotech company in 2010 enjoyed average revenues of around $42m while larger firms reported average revenue of around $124m. Additionally the European biotech sector also enjoyed a sizeable success with revenues totalling €13bn the same year. Global biotechnology revenues are estimated to grow to €103bn by 2013, bolstered by the pharmaceutical market which is expected to become a trillion-dollar industry by 2014.

These high revenues can attract more than just investors; smaller companies are seeing the benefits of asserting breach of their own patents in order to attain lawsuit settlements or licensing fees. Though more well-known in the technology sector, these ‘Patent Trolls’ have started to attract attention in biotech circles.

A standout case was that of Classen Immunotherapies Inc. which brought four biotechnology companies and a medical group to court for infringing on their patent of an immunisation schedule that could curb the risk of developing chronic diseases. Although the lawsuit was first thrown out by the district court as only a mental abstract, on appeal the federal court ruled in Classen’s favour citing that Classen has a “statutory process” that allows for patent protection.

This has set a troubling precedent in biotech law; since the Classen patents were somewhat broad, there could soon be a flood of similar companies trying to claim patent infringement based in immunisation or dosage schedules.

Indeed, there is proof of some small firms already trying to build a portfolio of biotech patents. These ’non-practicing entities’ deliberately gather patents – not in order to develop products – but rather extort other companies for settlements or licensing fees. There are already specialized law firms which help companies obtain and enforce biotech-specific patents. Such companies have been known to damage stock prices, delay production and eat into revenues – all of which is completely legal.

Many identify these frivolous litigations to lie not in the vagueness of the patents, but rather in unspecific patent legislation. In Ronald I. Eisenstein’s 2006 column in The Scientist, he notes that “One size does not fit all in terms of approaching patents.” Any legislation passed to curtail the practice of ‘Trolling’ in the technology sector may inadvertently harm smaller biotech companies and universities that rely on larger companies in the FDA approval process.

In his 2008 book Intellectual Property and Biotechnology: Biological Inventions, Dr. Matthew Rimmer offers some solutions to this growing problem. “Novelty and utility are the criteria used to judge whether something is inventive or not” he writes. “It is really those doctrinal concepts that need to be tightened.”

In a 2011 Forbes article Colleen Chien also offered some advice to defend against the trolls. She notes that many trolls will use contingent fee based lawyers to manage costs. Firms that pay via successful disposal of a suit or minimise settlement costs cn likewise minimise legal fees and increase the lawyer’s incentive to defend them. Furthermore, larger firms could be better off outsourcing their defence to specialist lawyers, rather than solely relying on their own legal team.

Patent trolls remain a very real problem in the world of technology. In the most infamous case, Research In Motion (producers of the Blackberry) paid a $600m settlement to NTP Inc for infringing their wireless email patents. Fortunately steps have been taken at a federal level. The passing of the Leahy-Smith American Patents Act in September 2011 has allowed any firm threatened with infringement to petition for a patent review within 4 months of being sued. Nonetheless the biotechnology sector must begin to reassess its patent rights and monitor such changes in legislation if it is to further grow as an industry.

About the author:

Fintan Burke is a student at the School of Biotechnology at Dublin City University. His main fields of interest include biomedical therapies and recombinant organisms.  Fintan may be contacted at fintan.burke2@mail.dcu.ie .

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