Investment feature: patently obvious

To most, patents are the life blood of innovation and discovery for the biotech sector, while to others they are a scourge. But as lawyers and industry experts warn, careless handling of the finer points of intellectual property can be catastrophic to both commercial and academic organisations.

Patent protection is one of the most critical considerations facing any biotechnology group, demanding extreme care and planning, but most importantly an awareness that successful filings are not rubber stamps on your IP.

"There is the need for great care in describing inventorship because it is based in law rather than patronage, and can result in invalidation of patents if mishandled," says the Garvan Institute's director of business development, Dr Jonathan Izant.

A patent is essentially a commercial contract between an organisation or individual and the government guaranteeing protection against anyone other than the patent holder profiting from a particular discovery or invention.

Despite such a clear definition, there are several conflicting views about the true value of patents with some even arguing that the concept itself rejects the spirit of science and discovery and threatens to deny humanity access to important discoveries.

"There is a difference of opinion - some think that patent systems stifle innovation but all development organisations with an R&D spend clearly see the benefits," says Phil Macken, a partner with Allens Arthur Robinson.

"The more compelling argument is that if companies do not have the incentive to gain a monopoly over their own developments then they won't spend the money because it can be reverse engineered once it hits the market. "Without that carrot, what encouragement is there for R&D?"

A classic example of how the mishandling of patent issues can severely undermine organisations occurred in the 1970s when a joint initiative between Cambridge University and a leading UK research organisation published, but did not patent, their work on monoclonal antibodies which form the basis of pregnancy kits. Lawyers have estimated this little oversight to have cost the group several billions of dollars in forfeited licensing revenues. And the irony, many point out, is that had the group been less complacent and secured a patent, their discovery would have been no less available to academic researchers; the only difference being the protection of their commercial rights.

"People have become a bit cleverer now," says Bill Pickering, partner of Blake Dawson Waldron patent services. "Patents are essential for commercialisation of any product, in particular biological products because the investment from conception to commercialisation is so high."

Despite this though, confusion still abounds, Garvan's Izant believes. "There are some in the community who are concerned about the deleterious aspects of patents but who have not always seen how they are the single most - if not the only - way small entities and small countries can participate in worldwide commercialisation."

This, Izant says, explains why small biotech companies will usually spend a large proportion of available revenue on their patent portfolio and why even research institutes need a portfolio of patents to manage the risk of some failing to generate a commercial return with a few that are very successful. "Patents are almost always the foundation for any licence or partner relationship with large biotech or pharmaceutical companies and thus are the currency or life blood of the industry," Izant says.

The importance of patents in the biotech sector is now somewhat universal, with the question as which countries one should seek a patent almost irrelevant now as the majority of significant discoveries are now registered according to the Patent Cooperation Treaty. The PCT preserves the right for applicants to file in other countries with large companies commonly seeking protection in 50 or more jurisdictions. "If the thing is worth protecting, people will try to get it patented in as many places as possible," Pickering says.

"Mosaicing" documents Changes to Australia's patenting position in April of this year have received a glowing endorsement from local industry figures and lawyers who believe that the new system will further stimulate innovation and raise Australia's world standing amongst analysts and major investors.

The so-called 'mosaic' amendment brings Australia into line with patent systems in the US and Europe by allowing examiners assessing the inventiveness of an invention to combine prior art documents with significantly less restrictions than previously.

This was an important change for Australia, especially given the lack of funds generally available for patent applications and protection, according to Jacinta Flattery O'Brien, patent lawyer and partner with Baldwin Shelston Waters. "The threshold for inventiveness has been raised in Australia," she says. "We are becoming more stringent in our patent assessments, bringing Australia into line with major jurisdictions."

While the US, Europe and Japan are seen to be the most important patent systems, Canada and then Australia follow close behind in the minds of many foreign applicants, which, considering the size of Australia, appears to be a fairly strong endorsement of the local patenting framework, O'Brien adds.

According to Blake Dawson Waldron's Pickering, the changes in April will make enforcement of patents that much easier in Australia. "The thing that all investors want is some level of certainty -- and I hope that this is the result."