Licensing of Expression Systems - Gaining a license can be a complex process, but a few key tips can help you avoid common pitfalls and patent infringements. - BioPharm International

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Licensing of Expression Systems
Gaining a license can be a complex process, but a few key tips can help you avoid common pitfalls and patent infringements.


BioPharm International
Volume 22, Issue 12

Avoiding Common Communication Problems

After you have identified expression systems relevant to your product, you then have to deal with licensing the technologies. Licensing or intellectual property (IP) professionals are employed or hired by the company to work with the licensor. Many of these professionals are attorneys, not all of whom have in-depth technical knowledge of the systems they are working with. This can pose a communication problem between scientists and corporate executives. The community of licensing and technology transfer professionals tends to be rather insular, sometimes preferring to deal with others with the same professional credentials. "Technology transfer has been described as the 'ultimate contact sport,' a game of complex signaling, posturing and negotiations among those in this exclusive gentlemen's club," says Ronald Rader, president of the Biotechnology Information Institute. It is also important to make sure that licensing professionals will use broad networking resources, and not restrict their efforts to their network of fellow professionals.

Negotiating the License

The next step is to negotiate the license. Nonexclusive licensing agreements, with the same technology also licensable by others, are generally the simplest to negotiate. Many organizations will have boilerplate legal forms set to go, while others will require multistep exchanges of proposals. IP and licensing professionals prefer more complete, complex agreements to cover more situations. The licensing fees and royalties (usually a percentage of annual sales revenue) for most expression systems and related technologies will generally be around 3–5%, but can be significantly higher, depending on the deal. There typically is an option to either pay higher fees upfront in exchange for lower royalties after commercialization, or vice-versa. Paying more upfront with lower royalties can result in significant savings (profit) for products attaining a high level of sales. It's always advisable to have an expert review any agreement.

According to the Licensing Executives Society's 2008 royalty survey, fixed royalty rates were used for most deals related to preclinical products. According to the survey, the average fixed royalty rate for preclinical products was 4.3%, with the rates for biologics slightly higher than for small molecules. The range for tiered royalty rates ran from 5–8% for preclinical to 14–18% for post-proof-of-concept. For these deals, 88% were exclusive, 54% included a fixed royalty, and 80% included an upfront payment. About half the deals estimated maximum sales of less than $100 million.

PATENT INFRINGEMENT

Patent infringement, although definitely illegal, is commonplace. Using technology that is patented by another party without a license is reported to be done at even the largest companies. Some companies adopt a "don't ask, don't tell" or plausible deniability approach to their manufacturing and discovery technologies. "IP attorneys at biopharmaceutical companies recognize that their scientists and executives avoid asking about the patent status of manufacturing-related technologies," says Rader. "This can allow a company to claim it isn't knowingly infringing patents." Thus, some companies ignore licensing certain manufacturing-related patents, assuming that most patent assignees considering a costly infringement suit will prefer to settle out of court or drop the suit. Licensing patents and technologies is sometimes simply not done because public disclosure may preclude anyone from knowing about a company's manufacturing processes.

BENEFITS OF LICENSING

Licensing often can provide access to know-how, regulatory documentation, and expertise from the licensor that is not available without a license. In addition, many licensors are eager to support their licensees, because they are interested in proof-of-concept for their technologies. Patent infringement, even if a company does not realize it is doing it, could result in legal prosecution, triple damages, other fines, and, theoretically, prison for responsible executives.

Eric Langer is president and managing partner at BioPlan Associates, Inc., Rockville, MD. He is also the editor of Advances in Biopharmaceutical Technology in India, 301.921.5979,

REFERENCES

1. Rader RA. Biopharmaceutical expression systems and genetic engineering technologies: current and future manufacturing platforms. BioPlan Associates; 2008 Nov. Available from: http://www.bioplanassociates.com/es/.

ERRATUM

In Table 1 of the June column, PharmedArtis GmbH was incorrectly listed as the commercial source of Arxula adeninivorans. It should have said that the expression platform is exclusively marketed by ARTES Biotechnology.


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