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Eric Langer has over 25 years experience in biotechnology and life sciences strategic marketing management, market research, and publishing. He has held senior management and marketing positions at biopharmaceutical supply companies. He has published and authored many books and reports on topics in Biotechnology, Large-scale BioManufacturing, and bioscience commercialization and communication. He teaches at Johns Hopkins University marketing management, biotech marketing, services marketing, and marketing in a regulated environment. In 1989 he co-founded BioPlan Associates, Inc. to provide market analysis, and strategy to biotech and healthcare organizations.
Gaining a license can be a complex process, but a few key tips can help you avoid common pitfalls and patent infringements.
Just about everything involving expression systems has been patented, and the use of anything more than basic technology often requires coughing up a fee for a license. Certainly, inventors deserve credit and reward for their hard work, but the complexities and layers this can add to a manufacturing strategy, on top of keeping track of what product is using whose licenses, can make licensing a legal nightmare. Knowing who has ownership can require some research.1
Today, most biotherapeutics are manufactured using E. coli, Chinese hamster ovary (CHO), or yeast-based expression systems, and these work-horse systems do the job. However, even these older systems have newer, add-on improvements that may require licenses for commercial applications (including basic commercial research). For example, some E. coli strains and CHO cells are generally used with licensed technologies that improve performance, such as newer vectors, promoters, and selection and amplification systems. So, even though the older technologies may be soon coming off patent, meaning they can be used without licenses or paying any fees, many users are willing to pay royalties or license fees to access improved performance.
Choosing a Technology
Most companies expecting to manufacture a recombinant protein or antibody get legal advice on how to license technologies. Licensing involves a series of generally predictable tasks, however, starting with an evaluation of the options.
One must decide whether to use one of the old, predominant host systems (e.g., E. coli, CHO, yeast), or seek out a newer system likely offering advantages such as increased yields, cost savings, and adaptability to the use of disposables. A large number of technologies are available for commercial-scale recombinant protein expression. The book, Biopharmaceutical Expression Systems and Genetic Engineering Technologies Directory, is one source of information on licensable expression system technologies. There is also considerable scientific literature related to expression systems. Whether one sticks with an older technology or goes with a newer one, you still may need one or more licenses to get what you really need.
Despite biopharmaceuticals being one of the most complex commercial products, many companies remain short-sighted and either do not explore their options or settle on using the same technologies they've been using. Old technologies can be good enough, particularly if long-term costs of manufacturing are not a major concern. However, by using old technologies you might lose out on efficiency (e.g., higher yield, increased speed), adaptability, and cost-effectiveness in the long term. For example, yields over 30 g/L are now being reported in perfusion culture with the PER.C6 human host cell system from Percivia (Crucell/DSM), compared with the single g/L range in older technologies. Often, older systems involve the use of large fixed stainless steel vessels, whereas newer technologies are more adaptable to modern bioreactors, often including single-use systems. Systems like DowPharma's Pfénex expression technology, a Pseudomonas fluorescens-based platform, is flexible and can be used to produce therapeutics at very high titers. Selexis (Geneva), developed a technology to improve yield of production cell lines in mammalian cells in suspension and in serum-free media more than 20 fold. There are over 300 other technologies awaiting evaluation.1 So, a first step is simply to be aware of what is available.
Selecting the Right Type of License
Some licensors create complex rules in an effort to get their technologies widely distributed while still ensuring that commercial organizations pay for access. RTC (Tucson, AZ), for example, licenses its Pichia platform to more than 120 companies. A license is required for even research-only use of this technology. Companies can get short-term use of a Pichia kit for evaluation. A commercial license for R&D, however, costs more than $50,000. Moreover, if you commercialize a product, fees can be $75,000 plus 3–5% of revenues. Also, if you buy a kit from a third party, you might end up blocking the rest of your organization from testing the technology until you pay the licensing fee. Similarly, Jena Bioscience GmbH (Jena, Germany) provides its Leishmania expression system without a license to any academic or public institution but charges a license for commercial purposes.
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, 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.
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, firstname.lastname@example.org
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/.
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.