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    Columns

    When a Patent Is Not Enough: Product Commercialization Considerations

    A comprehensive intellectual property strategy can help assure successful commercialization.

    When a Patent Is Not Enough: Product Commercialization Considerations
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    By Gregory Stephens & Marina Volin, Esq., Windrose Partners11.01.17
    Since 1971 the term “dietary supplement” has been referenced in more than 20,000 U.S. patents, published patent applications, and published PCT patent applications (international). In this same timeframe, the term “probiotic” alone has been referenced in claims of 723 issued U.S. patents and “dietary fiber” in nearly 500. With the growing trend for intellectual property protection in the nutraceuticals market, the development of new, more sophisticated products is becoming a complex process increasingly wrought with uncertainties. The following discussion summarizes steps to decrease the risk to product commercialization and discusses related intellectual property issues that require attention prior to launching new products, and the need to evaluate “freedom to operate” in the rapidly growing nutraceutical market.

    Got Patent?
    In a business world, the term “patent” has a “money” ring to it. Inventions attract capital and keep competitors at bay. While the pharma industry thrives on patents, the nutraceutical industry is considerably slower to jump on the bandwagon. Why? Let’s take a more detailed look at patents.

    Contrary to common belief, a patent does not give the patent owner the right to practice the invention. A U.S. patent gives the patent owner a right to exclude others from making, using, selling or importing a patented product, manufacturing process or a method of use into the U.S. It is a limited right because there is a limit on lifespan, geographic area, and the scope of claim coverage, all of which define the boundaries of the right to exclude.

    The protection afforded by a patent has a limited duration. The patent term begins on the date of issue and lasts for a maximum period of 20 years from the filing date, provided the patent is “maintained” for the entire period by timely payment of maintenance fees. Upon the expiration of the patent term, a patent is considered to be in the public domain and may be freely used by anyone.

    Patents also have a limited geographic territory; specifically, they are limited to the geographic area of the country of issuance. For example, a U.S. patent is enforceable only within the U.S. and its territories. The invention is free to be used by anyone in countries in which the patent is not registered. Companies generally make strategic decisions about key markets for their technologies and select the countries in which they will seek patent protection accordingly. Thus, technologies may be protected in a company’s key markets, but not in the countries where commercialization is less likely.

    A common misconception involves confusing a published international application filed as Patent Cooperation Treaty (PCT) for an international patent. There is no such thing as an international patent, and publication of a patent application is not a patent either. A published international application does not have a right to exclude as the patent does. Unless further steps are taken to pursue the international application in PCT member countries in a timely fashion, the application will not mature into a national patent.

    Some businesses decide not to obtain patents and use other forms of intellectual property protection, such as trade secrets, which is outside the scope of our column.

    Product Commercialization Risks & Considerations
    One of the risks for the marketer of a new product is that its commercialization may be blocked by a competitor holding a patent covering an ingredient or technology that is incorporated in the new product. In this situation, without a license or authorization from the patent owner, the marketer runs a risk of infringement. Therefore, securing the “freedom to operate” (FTO) early in the new product evaluation process is paramount.

    Obtaining a license from a patent owner minimizes the risk of being accused of infringement. However, prior to signing the license agreement, the developer should obtain an independent assessment of the licensed patent. A due diligence analysis conducted by a patent attorney will provide an assessment of the extent of the rights offered by the license and may be used as a bargaining chip in negotiating the license terms. In this analysis, the limits on lifespan, geographic area, and the scope of claim coverage on the patent as discussed previously will be assessed.

    After the new product developer obtains the due diligence opinion and subsequently signs the license agreement, does he still need to be concerned about freedom to operate regarding the licensed patented ingredient? The short answer is yes. There is a difference between licensing patent protection for a product and selling the patented product. Owning a patent confers no rights to the patent owner to use, make or sell the product. There may be others who may own a patent for a related technology, which may have broader claims. In this situation, use of the licensed ingredient may infringe on a patent with broader claims.

    Clearly, two patents cannot be issued for the identical invention. However, one may obtain a patent for a species (a narrower claim) even if there is an existing patent for a genus (a broader claim), if one can show that the species has unexpected properties. In this case, a patent claiming a genus (a broader claim) would be dominating. To practice the invention that relates to the species, a license is required. The opposite is also true—the owner of a patent with a broader claim would not be able to practice the invention that relates to the patented species (a narrower claim). To avoid infringement, a cross-licensing may need to be implemented.

    How to Evaluate Freedom to Operate
    What is freedom to operate and what should the new product developer do to evaluate the freedom to operate?

    The Freedom to Operate (FTO) is a legal opinion, which involves a comparison of a product or process with a patent claim. It entails searching for issued or pending patents related to the product in question and analyzing the patent claims.

    Searching for patents can be conducted by anyone utilizing the U.S. Patent and Trademark Office (USPTO) website (www.uspto.gov) or other sources. However, in most situations the analysis should be conducted by a patent attorney because this is a complex task and involves comparing the product, ingredient or process to a patent claim, evaluation of claim scope, and study of prosecution history.

    Under U.S. Law (35.U.S.C. 271), it is an act of infringement to make, use, offer to sell, or sell any patented invention, within the U.S. or import into the U.S. any patented invention during the term of the patent, without authority. Although a patent includes a specific description of the invention, only the subject matter of the claims can be infringed. The claims of a patent can be found at the end of the patent description. A patent claim defines the exact boundaries of the invention so that others would know the extent of the exclusivity given to the patentee and would be able to avoid infringing.

    Obtaining FTO analysis based on the search of patent literature is only the first step. If the patent search reveals there are patents that limit your freedom to operate, you will need to decide how to proceed. Some of the most common strategies for acquiring freedom to operate include the following.

    Obtaining ownership rights by assignment or in-licensing. License is an authorization from the patent holder to use the patented technology for specified purposes, in specified markets and for a specified period of time. The value of such an agreement will depend on the terms and conditions of the proposed license. While there may be risk of some loss of autonomy in the license agreement and the patent holder will require compensation (lump sum and/or royalty payments), this may be the most expeditious route to market.

    Cross-licensing. Cross-licensing involves exchanging licenses by two parties to be able to use certain patents owned by the other party.

    Inventing around. In this alternative, one may operate around the invention. This implies making changes to the product or process to avoid infringing the patent(s) owned by others. For example, if one’s freedom to operate is limited by a process patent, then it may be possible to develop an alternative process for making the same or similar product and thus be able to market the product without having to pay royalties under a license.

    Will an FTO opinion protect you from infringement risks? The FTO opinion does not provide an absolute certainty because in the real world unlimited resources are not available to conduct a totally exhaustive and comprehensive patent search. However, if an infringement suit is brought against your company, the FTO opinion by a patent attorney should protect you from a willful infringement verdict and help lower the risk of paying damages.

    Whether you choose to patent a new product or not, do not assume that there are no patents covering the product by others. By having a comprehensive intellectual property strategy, you can help assure successful commercialization of products and a competitive advantage in the marketplace.


    Gregory Stephens
    Windrose Partners

    Greg Stephens, RD, is president of Windrose Partners, a company serving clients in the the dietary supplement, functional food and natural product industries. Formerly vice president of strategic consulting with The Natural Marketing Institute (NMI) and Vice President of Sales and Marketing for Nurture, Inc (OatVantage), he has 25 years of specialized expertise in the nutritional and pharmaceutical industries. His prior experience includes a progressive series of senior management positions with Abbott Nutrition (Ross Products Division of Abbott Laboratories), including development of global nutrition strategies for disease-specific growth platforms and business development for Abbott’s medical foods portfolio. He can be reached at 267-432-2696; E-mail: gregstephens@windrosepartners.com.

    Marina Volin, Esq.
    This column was written in collaboration with Marina Volin, a seasoned intellectual property and corporate attorney with experience in the nutraceutical, chemical, biotechnological, pharmaceutical and medical device industries. She is a registered patent attorney licensed to practice before the U.S. Patent and Trademark Office and admitted to both the Pennsylvania and New Jersey Bars.
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