There are many factors to be considered for a project developing a new product or process, but the ability to carry out commercial plans without infringing third party patent rights (freedom to operate, or FTO) should not be overlooked.
Patent litigation can result in an injunction preventing access to a market plus a damages award. If a product has been on the market for several years, a damages award can be significant.
In 2016 Merck won US$2.5 billion in a patent infringement action against Gilead in relation to two Hepatitis C drugs. However, the award was never paid as, on appeal in 2019, the patent in question was held to be invalid and, in early 2021, the US Supreme Court confirmed that decision.
In 2016 Australian hearing implant manufacturer Cochlear were ordered to pay damages of about US$268 million following patent litigation and in 2020 the US Supreme Court denied Cochlear’s petition for a review meaning that the damages have to be paid.
Although the ultimate outcomes were different, both cases no doubt caused stress for the defending companies. If such court actions are unexpected the stress is likely to be significantly greater.
For any new development project there is a possibility that a third party has rights that could limit commercial exploitation of the resulting product or process. Some companies may not consider assessing that FTO risk necessary for a project to proceed. However, the high development costs typical in the medical sector make it important to understand, and where possible reduce, such risks.
To understand FTO risks, searches can be performed to find patents that could be infringed. These searches are often referred to as FTO, or clearance, searches. The more detailed the search and review, the greater the understanding of the risk, but the costs of conducting and reviewing these searches varies significantly depending upon the level of detail. A cost effective strategy can be to conduct broad searches near the start of a project and more detailed searches as it moves forward so that the cost, and understanding of risk, is appropriate for the project stage.
A broad search at the start of a project might look at the patent landscape in the technical area. This landscape should include expired patents, as well as those that are in force. If a product is very similar to a patent that reached the end of its 20 year life the chances of a valid patent covering that product being in force is greatly reduced. A dense patent landscape in the technology area could indicate an increased FTO risk. A landscape search should also help to identify particular areas of the project that might be higher risk.
As the development progresses more detailed searches, focussing on particular areas of the project, can be carried out. These can be conducted on an ad hoc basis, or as part of particular project milestones, for example proof of concept or a design freeze.
If a risk is identified it is a commercial decision whether the project should proceed, but it may be possible to reduce that risk. Modifications can be made to ‘design around’ the patent so that it no longer poses a risk, but sometimes changing the design is not possible, or practical. The validity of the problematic patent can be assessed to determine whether it would survive a challenge during litigation. The validity can be directly challenged in court to ‘clear the way’ before commercial launch. Additional searches could be carried out to find publications to support any validity challenge. Another option to remove the risk, while potentially benefitting from the protection, is to obtain a license, or purchase the patent. In general, more options are available if a potential risk is found early in a project.
“Publishing for freedom to operate” is a phrase sometimes used and it can be misleading. Publishing will not alter whether third party rights already exist that might prevent commercialisation. However, publishing will prevent a third party obtaining valid rights if they file an application after that publication. Publication cannot make the situation better, but may prevent it from becoming worse.
If you have any queries regarding this topic, or other pharmaceutical or biotechnological matters, please contact Alex Bone at firstname.lastname@example.org or visit aathornton.com