With antibodies accounting for seven out of the top ten global drugs¹, it is of critical importance that those companies that invest huge sums of money into R&D in this technology space are able to protect their investment from unlawful competition. Whilst the patent system provides a pretty good framework for achieving this, the approaches taken by patent offices in different parts of the world can vary widely, potentially impacting one’s ability to secure optimal patent protection (in terms of territorial scope and/or patent claim scope). Unsurprisingly, therefore, the risk of failing to achieve commercially viable patent protection in a key jurisdiction (plus loss of an important revenue stream) provides a strong incentive to operate at the highest possible patentability threshold. Here, we will focus on the European Patent Office (EPO), and on the key issues you will likely need to address in order to obtain patent protection in Europe for a new antibody therapeutic.
Obtaining Patent Protection for Antibody Subject-matter at the EPO
For antibodies directed at a new target, such as a new antigen structure that has not been targeted before, it may be possible to obtain broad patent protection at the EPO for antibodies that bind specifically to that target. However, these broad patents are becoming less common because it is now unusual to discover such a new target. Most antibody patents, therefore, relate to antibodies that bind to a known target, and where other antibodies binding to the same target have been described.
The EPO allows the patenting of new antibodies, but only when said antibodies also demonstrate an unexpected technical effect (i.e. an inventive step) when compared to antibodies that were known before. Unlike some patent offices around the world, which may concede that a new antibody is inventive because of a unique structure or sequence it possesses when compared with previously known antibodies, a difference in structure or sequence alone is not enough to establish inventive step at the EPO. Moreover, this remains the case irrespective of whether said unique structure or sequence maps to the framework regions or to the complementary determining regions (CDRs) of the antibody. Thus, a new antibody against a known target will only be considered inventive by the EPO if it shows an unexpected property, or if it was unexpected that such an antibody could be produced at all.
A key component of the EPO’s reasoning is that many techniques in the field of antibody production are routine, and that antibodies against a given target can be produced in large numbers without any inventive input being needed. For example, the EPO considers it routine to immunise animals with an antigen, to obtain a large number of different antibodies against that antigen that are produced by the animals, and to screen the resulting antibodies to confirm binding to the antigen of interest. Because the generation of antibodies in such immunisation methods is essentially random, the EPO assumes that essentially all antibodies against that antigen could be found eventually by just routine trial and error experiments, given a sufficient amount of time and resources. As a starting point, therefore, the EPO will assume that any antibody that has been produced against a known target could have been found in a routine way, and so is not inventive. Thus, the burden lies with the applicant of a patent application to convince the EPO otherwise.
The EPO also considers that other techniques in the antibody field, such as humanisation and affinity maturation, are now routine, and again that trial and error would eventually produce any effective humanised or affinity matured variants of a starting antibody. This suggests that over time, it may become increasingly difficult to persuade the EPO that antibody claims are inventive, as more techniques for antibody production, optimisation and selection become routine in the field. Thus, for new antibodies that bind to a known target (particularly if other antibodies against that target are known), the applicant must demonstrate there is something that makes said antibodies surprisingly better than other antibodies that were known to bind to the same antigen (else surprisingly better than would have been expected based on what was known about the target antigen and corresponding antibodies).
In theory, any kind of advantage can be relied upon. For example, this might relate to the way that the antibody binds to its target, such as improved specificity, cross-reactivity, or affinity; it might relate to improved properties of the antibody in vivo or in vitro, such as improved pharmacokinetic properties, low immunogenicity, or improved biological activity; or it might be based on other properties of the antibody which do not relate directly to its binding properties, such as improved storage stability, improved formulation properties or improved expression levels.
In practice, any advantage relied on must be surprising in its own context. For example, for a humanised antibody, the EPO might reasonably expect that it will have reduced immunogenicity compared to an antibody that is not humanised, so such a technical effect alone is unlikely to be enough to confer an inventive step. However, if a humanised antibody were to retain a high affinity for its target antigen, this might reasonably be considered surprising and thus supportive of an inventive step. Conversely, if an asserted technical effect is found to be unsurprising, then it is unlikely the EPO will allow any patent claim to the antibody, irrespective of whether the antibody in question is defined by reference to all six CDR sequences, both variable domain sequences, or even the full amino acid sequence of the antibody molecule. In such scenarios, even a very narrow “picture” claim is unlikely to be awarded.
Having established the presence of an unexpected technical effect (and thus inventive step), the next question to be considered by the EPO is that of claim scope. Namely, how broad can I claim variants of the antibody?
This assessment flows from analysis of the scientific principles that underpin the asserted unexpected technical effect, and attempts to ensure that the scope of patent claim awarded is commensurate with the level of scientific contribution the invention provides above and beyond the prior art. To put this another way, the EPO’s general approach is the unexpected technical effect relied on to support inventive step must be demonstrated across the full scope of the awarded patent claims. In more detail, it must be at least technically credible that all the antibodies across the scope of your defined claims demonstrate the same unexpected technical effect / advantage. The EPO’s analysis will, therefore, involve considering the properties or features of your antibody that are responsible for that advantage.
For example, you may be able to establish that your antibody is inventive because it has particular binding selectivity for one antigen and not to another. If your inventive step is based on the binding specificity or selectivity of your antibody, then the EPO is likely to take the view that the advantage might reasonably be shared by other antibodies that have the same set of six CDRs, or both variable domain sequences of your antibody. For this type of advantage, the EPO will, therefore, usually insist that you limit your patent claims to antibodies that include all six CDR sequences, or both variable domain sequences, of your antibody. It can be possible to obtain broader protection than this, but to do so, it is likely that you will need evidence that the same advantage is also found for other antibodies that do not have these particular sets of sequences. For example, to obtain a patent that does not require all six CDR sequences to be present, you might need data showing that antibodies with fewer than six CDRs, or antibodies having particular variations in the CDR sequences, will retain the same inventive advantage. The scope of patent claims that you will obtain will depend upon the related antibody sequences that you can persuade the EPO will retain the inventive advantage.
Another common advantage that is used to establish an inventive step at the EPO is improved affinity. The EPO considers that the choice of framework regions, as well as the CDR sequences themselves, may considerably influence antibody affinity. This means that if inventive step is based solely on an antibody having improved affinity for a target, then the EPO is likely to require the framework regions and the CDR sequences to be defined in the patent claim. In practice, this means that you will be asked to limit your patent claims to antibodies having the same heavy and light chain variable region sequences as your antibody. Again, if you wish to obtain broader patent scope, then it is likely that the EPO will require supporting evidence that the improved affinity would be retained with other framework.
The same principles will be applied by the EPO to any advantage that you are relying upon to obtain an inventive step. If the advantage is linked to a particular structure or feature of your antibody, then the EPO is likely to require that structure or feature to be defined in the claims. For example, if your advantage relates to improved effector functions, then the EPO may require particular Fe domain sequences to be recited in the claims. If the advantage relates to a physical property of the antibody, such as its stability or production yield, then the EPO may consider that to be a property of the molecule as a whole, and so require the full antibody sequences to be defined in the claims.
If you need to rely on a technical advantage over other antibodies, then how can you establish that such an advantage exists, and when do you need to provide that information? The EPO considers that it must be derivable from your original patent application that the invention had been made before that application was filed. This does not mean that your patent application needs to provide absolute proof of the advantage. Indeed, it may not be possible to include the ideal comparisons in your application to prove that an advantage exists. For example, the EPO requires that an inventive step is established when compared to what it considers to be the “closest prior art”. In this field, that is likely to be an earlier antibody that binds to the same antigen and that has similar properties. However, you may not know at the time of the patent application being filed what other antibodies may exist to the same target, and you may not be able to determine which antibody the EPO will later consider to be the “closest”. Even if you are aware of earlier publications describing other antibodies, those antibodies may not be publicly available, and so it may not be possible to carry out any direct comparison in order to confirm that an advantage exists.
What the EPO will look for in the patent application is enough information to make it technically plausible that the advantage would be achieved. Your patent application might include data demonstrating particular effects or measuring particular parameters for your antibody, and might, therefore, provide data that could be used for a subsequent comparison with other antibodies, or it might include technical reasons why an effect or advantage can be plausibly derived from the available data.
If you can meet this threshold and persuade the EPO that your advantage was technically plausible from the information in your original patent application, then you may be permitted to rely on additional evidence, not included in the original patent application, to confirm the existence of the advantage. For example, you may be able to submit in vivo data confirming effects that were shown in vitro, or you may be able to submit comparative data confirming that your antibody does show an improvement when compared to particular antibodies that the EPO has selected as the “closest”.
In conclusion, the EPO takes a technical and scientific approach when considering inventions in the antibody field. Every case will be judged on its own facts, but in general, the EPO will start from a number of preconceptions about what could have been done in a routine way, and the burden is likely on you to counter those preconceptions in order to persuade the EPO that your antibody is inventive.
An antibody that is new, and that is effective at binding its desired target, is unlikely to be considered inventive by the EPO unless it also exhibits some kind of unexpected technical effect (e.g. an advantage) when compared to other antibodies against the same target. This is worth considering when you draft a new patent application in this field. Ideally, your patent application will include some data supporting the superior properties of your antibody, or it will at least include a technical rationale to make it credible that your antibody has such an advantage. You should also consider the scope of claim that the EPO is likely to allow based on the advantages that you can establish. If you want to obtain broader claims than are likely to be allowed by default, then you may need to obtain more data before filing the application, to show that your advantage can be obtained with a broader range of antibodies than might otherwise be expected. Most importantly, when preparing a patent specification, you should think ahead to present a tiered range of (plausible) technical effects that may be relied on to provide potential fallback positions during prosecution and beyond.
This article was originally published in the International Biopharmaceutical Industry Journal.
1. Urquhart (2020) Nature Reviews Drug Discovery 19: 228
Fintech places particular demands on high frequency computing (HPC) that requires significant investment into computing resources such as CPU and GPU, in addition to the requirements of data scientists’ and quants’ time to maintain a complex and ever-evolving code base. New, more effective solutions are required as sophistication of regulations and increased risks grow.
Machine learning (ML) is also increasing in prevalence. In so-called supervised learning, ML models are trained on input data sets that have known outcomes; they are then able to ‘learn’ from these and predict outcomes for new input data sets.
The intellectual property (IP) in such techniques is of enormous value. Over the last few years, there have been significant changes in the legal landscape, both in terms of trade secrets protection and what is eligible for patent protection in major jurisdictions. More changes are coming. This article explains some of the challenges surrounding IP in this area and gives practical direction in how to approach the issue.
Changes in the legal landscape – risks and mitigations
The main patent granting authority for Europe (the EPO) is preparing to issue a landmark decision on the granting of patents for the computational techniques used for ML and the modelling of complex systems. There is justifiable speculation that that decision will herald a more liberal approach to the granting of patents in this area – many of which may have clear relevance to the fintech sector. This is important and financial institutions should take note.
Patent infringement represents a very significant hazard. For an infringer in financial services, the cost of paying damages to the patent holder could be just one of the problems they face because a patent holder may obtain an injunction overnight to prevent use of a patented technology. The infringer may thus be forced to withdraw service from a client immediately. If such sudden disruption of service causes consequential losses for the client, the infringer may be liable to their client for those losses. This is to say nothing of the damage to the client relationship, and the not insignificant financial cost and reputational damage of being found to have infringed a patent.
Patents are unique amongst IP rights in the fintech space. Confidential information and trade secrets in Europe only provide a private contractual right against those who have agreed to confidentiality. Copyright is a little broader, but direct or indirect copying must be proven if copyright is to be enforced. Neither copyright nor trade secrets offer any protection outside these limited bounds. Patents on the other hand can be enforced against anyone who uses a technology, regardless if they learned it honestly or created it independently themselves.
This poses a problem: how can fintech innovators protect themselves against patent risk?
Help is at hand: the strategies that have been used in other fields of engineering for decades can be applied directly to fintech. Innovators must conduct sensible patents searches to identify the most likely risks. If found early, problem patents can be opposed at the EPO before they come into force, because defending against them later is at least two orders of magnitude costlier and riskier. This cannot catch everything however, so the most widely used strategy for controlling risk from third party patents is to secure patents of one’s own. The aim of this ‘defensive strategy’ is that one’s own patents present a risk to the competition, or at least cover desirable technology. A competitor who knows they might themselves infringe a patent is unlikely to assert their own patents against the holder of that patent. This strategy has kept the peace in the telecoms and electronics industries for generations, and a leading patents judge once described it as “the only rational way to use the patent system”. What makes the ‘smartphone wars’ newsworthy is that they buck this decades’ long trend.
Case study
Dmitri Golubentsev is the founder of Matlogica, a young fintech startup offering a niche proposition for large financial organisations focused on improving risk management capabilities in terms of performance and cost effectiveness. As a challenger startup, Dmitri says he has proven that the technology their competitors do not believe is possible brings demonstrated and significant performance improvements.
Technology designed to improve performance of applications built using high-level, object-oriented languages has always been challenging to protect with patents. However, Matlogica’s approach works by breaking down and rebuilding the primal code into a recorded function, which is thread safe and can be safely executed on multicore systems. This provides a technical benefit which is the basis of patentable technology.
A complete strategy
There is more to life than patents. Any business operates in a landscape of commercial relationships. The IP and trade secret issues which arise in that landscape just add a further dimension to the existing considerations
in managing those relationships. Other factors may be more or less important at different stages, but taking careful and measured steps at the right time can increase leverage and achieve significant market impact. These steps can be as simple as just ensuring sensitive information is handled properly; ensuring that agreements with development partners are properly drafted and address the key IP issues; or identifying patentable inventions and choosing when to protect them.
Asked to comment for this article, Dmitri said: “Although we are now publicly recognised by leading experts as a breakthrough technology, it is natural to expect some friction during our business’ first steps. By investing in IP, we are not only reducing our barrier for entry, but also increasing chances for partnerships with established vendors. Our patent and IP position allows us to approach a wide range of potential clients, partners and competitors without risk of the technology being easily copied.”
It is common for fintech businesses to overlook these questions, or assume that technology is not patentable, or that questions of ownership can be dealt with once the value in a technology has been demonstrated. Experience shows that this is not the right approach: the value of simple steps done early cannot be overstated.
A version of this article was originally published in The Patent Magazine in October 2020, and a version of this article featured in Fintech Bulletin in September 2020.
Investors come in all shapes and sizes – from professionals to friends or family members. This spectrum results in an investment risk profile that is related to the investment experience, the familiarity with the investment opportunity and the independent advice provided prior to the investment decision.
The friends and family end of the spectrum also has additional ‘emotional’ complexity, that in an ideal world would not play a part in the decision, but in reality can be a significant factor.
While the professionals will have a team of experts to advise them, friends and family often rely on emotion to make the investment decision. While this is understandable, it greatly increases the risk of a bad outcome which can include the loss of friendships and family disputes. Investors of all kinds should take the opportunity to offer counsel to the investee, rather than getting swept up in the excitement of investing or overwhelmed by the enthusiasm and apparent knowledge of the investee.
Best practice is to expect a well-researched business case, including worst case analysis with detailed justifications for any assumption regarding markets and competition.
If emotion has to play a part, then the best approach is to write off the investment at the beginning and have no expectations of the outcome, any positive outcome is then a bonus.
Unfortunately, we often speak to disappointed investors and generally we find that the key mistakes were made at the very start of the project by not approaching the investment in a professional way. As the saying goes, ‘preparation prevents poor performance’, which includes appropriate due diligence on the subject matter, markets and the investee. A sceptical stance will offer more investor protection and flush out any ‘soft’ proposals (i.e. if the investee is not able to offer sufficient evidence to support a proposal).
This may appear difficult with friends and family, but a third party opinion from a business advisory can be a sensible way to avoid conflict of interest and bad investments, as well as wasted investee efforts, thus a benefit to all concerned.
In addition to a myriad of new innovations focusing on hydrogen production, there are an equal number of companies developing technologies to use hydrogen safely and efficiently as an energy source.
Significant advances have taken place in recent years in both hydrogen production and its use as a source of clean energy. In a recent white paper from the International Energy Agency (IEA) titled ‘The Future of Hydrogen – Seizing today’s opportunities’ (IEA, 2019) produced ahead of the G20 meeting in Japan in June 2019, the potential for hydrogen as a source of clean, secure and affordable energy was heavily promoted, with the potential to decarbonise a number of high CO2 emitting industries such as long-haul air-travel and haulage, as well as chemical and steel production. As hydrogen production is not weather dependent, is has the ability to assist where variable output and intermittent renewable sources such as wind or solar may struggle.
While the potential use of hydrogen is widespread and its use in vehicles – particularly for public transport – has already begun, significant policy changes, and more importantly changes in attitude and industry support, will be required to fully take advantage of the benefits that hydrogen energy can offer. International demand for hydrogen is on the rise, and specifically in China, South Korea, the US, Europe and Japan, it is expected to increase up to 10 times over the coming decades. Many countries have therefore already begun introducing hydrogen energy strategies to roll out its use and to ensure that infrastructure and production can meet demand. The European Commission recently adopted a new strategy on the use of hydrogen and development of hydrogen technology in Europe, from research to production over the coming years (European Commission, 2020). In addition, in March 2020 the European Clean Hydrogen Alliance (ECH2A) was announced, bringing together multiple stakeholders to meet the hydrogen production and distribution needs across Europe (ECH2A, 2020). To help realise the growing demand for hydrogen production and hydrogen energy infrastructure/distribution, many high innovation companies across the world are developing new technologies for the safe and sustainable production, use and transportation of hydrogen.
One such innovator, a member of ECH2A and a client, is hydrogen generator designer and manufacturer, Enapter, with operations in Germany, Italy, Thailand and Russia (Enapter, 2020). Enapter has developed a patented technology based on Anion Exchange Membrane (AEM) technology that produces green hydrogen (H2) gas via the electrolysis of water, without the need for expensive and environmentally unfriendly noble metal or titanium plates, often seen in other electrolysis solutions. The solution is compact and offered as a single unit and as such is stackable, meaning that hydrogen production via the Enapter system can be easily scaled as demand dictates. The technology has already been implemented around the world for residential purposes and for rural electrification and microgrid storage. This latter use has been highlighted in a recent article by Forbes: ‘Hydrogen May be the Crucial Jigsaw Piece for Green Microgrids’ (Silverstein, 2020).
Enapter’s activities have attracted significant attention in Germany, homeland of senior founder Sebastian-Justus Schmidt, where the company has won in the ‘Industry’ category at the annual Handelsblatt Energy Awards (Handelsblatt, 2020) in January 2020. More recently, the German government has adopted a national hydrogen strategy plan for the production and use of hydrogen, which will likely further drive and incentivise innovations in this sector in Germany and further afield.
In addition to a myriad of new innovations focusing on hydrogen production, there are an equal number of companies developing technologies to use hydrogen safely and efficiently as an energy source. Many of these innovations have taken place in the development of hydrogen fuel cells in the automotive sector. The number of patents filed worldwide in this sector have reached in the thousands per annum over the last 10 years (Pohlmann, 2019). The companies mainly responsible for new filings in fuel cell technology have been Japanese automotive companies such as Toyota Motors, Honda, Nissan, and Korean Hyundai; although both Ford and General Motors have shown increased activity in recent years. A recent article by the American Chemical Society has highlighted the rise in innovations since 2009 focusing on mechanism of safe transportation and storage of hydrogen, through existing infrastructures centred around ammonia and methylcyclohexane, from which hydrogen can be later extracted (Sayfullin, 2020).
In the UK, considerable efforts have been made to demonstrate the extensive production and supply of hydrogen with the awarding of significant government funding for large-scale projects such as Dolphyn, which integrates floating offshore wind turbines with integrated water treatment units and electrolysers, which could then pipe the hydrogen to shore; Hynet, which is based on Johnson Matthey low carbon technology and a consortium of other companies including Progressive Energy, Essar and SNC-Lavalin; or HyPER from Cranfield University which is based on a sorption enhanced steam reforming process developed by the Gas Technology Institute (GTI) (Crown Copyright, 2020).
Increasing innovation and heavy investment in research, and consequently in intellectual property (IP) assets such as patents, in the both the production and use of hydrogen has not been lost on the investment community worldwide. A Financial Times article published earlier this year (Sanderson, 2020) highlights investors’ interest in hopping on the hydrogen bandwagon as shares in numerous hydrogen production companies have soared, partially due to increasing large investments from a number of large multinationals and increased government subsidies.
Bosch has had a JDA agreement in place since 2018 with UK-based Ceres Power, which has developed a solid oxide based fuel cell technology as well as making an equity investment of circa £9m in the company, while UK-based developer of IP heavy businesses IP Group Plc had an 18.6% equity share in the business (IP Group, 2020). Earlier this year, Bosch increased its stake in Ceres Power to 18% following a share subscription (Proactive Investors, 2020), while IP Group recently sold some of its shares in the business.
Likewise, UK-based Electrolyser company ITM Power has recently entered into a joint venture with gas supplier Linde to form the new entity ITM Linde Electrolysis GmbH (ITM Power, 2020) following significant strategic investment by Linde in late 2019 (ITM Power, 2019).
European utility company Enel has announced that it will launch a hydrogen business in 2021 (Reuters, 2020), while venture capital (VC) interest in supporting early-stage hydrogen companies has steadily increased. BGF recently invested in fuel cell company Bramble Energy, while a hydrogen-focused VC fund called ‘AP Ventures’ was established in 2016 in London to support companies in the hydrogen value chain and already counts companies such as US Altergy (PEM fuel cells) and Norwegian ZEG Power (High purity H2 and CO2 production) amongst its portfolio companies.
Overall, it is clear that there is significant interest from private industry, the investment community and governments worldwide in further developing the hydrogen economy, although many realise that hydrogen remains too expensive (and the required infrastructure too intermittent) at this time to enable widespread adoption in the near term.
With so many innovations taking place in hydrogen production and use, and more generally across the energy sector, it is becoming increasingly important for these cutting edge energy companies to not only actively protect their technology via patents, but also to identify and actively protect other intangible assets including designs, trade secrets, software assets, algorithms and data as these assets not only drive growth and increase value in the business, but also provide a way of attracting investors to aid in the development and commercialisation of the technology.
The 2020 edition of IAM Patent 1000: The World’s Leading Patent Professionals has been launched and Mathys & Squire is delighted to feature as a recommended firm once again. In addition to our firm ranking for prosecution, four of our patent partners have been singled out this year as recommended individuals: Jane Clark, Chris Hamer, Martin MacLean and Craig Titmus.
The firm’s ‘hands on’ ‘A-Z approach to patent prosecution’ and ‘invaluable assistance in contentious scenarios’ is highlighted, with one source commenting: “They showed an excellent balance of lateral thinking, pragmatism and ambition for our invention. Some of their suggestions even went beyond drafting the patent and into ideas that might improve the invention itself.”
Jane Clark, who “develops new skills for new areas that we get involved in, is creative in finding solutions to difficult obstacles and is very prompt, with strong attention to detail and execution.”
‘Chemistry maven Chris Hamer knows all there is to know about ionic liquid technologies and routinely shares his wisdom by lecturing to chemistry and chemical engineering students at Queen’s University Belfast.
‘The firm’s resident biotechnologists include Martin MacLean and Craig Titmus: MacLean showcases his knowledge on the targeting of bacterial toxins through his work for Ipsen Bioinnovation; while sustainable technology start-up Colorifix calls Titmus a “lifesaver” for his slick management of its fabric dye patent portfolio”.’
IAM Patent 1000 has become the definitive directory exclusively dedicated to identifying the world’s leading patent services providers. The extensive research process for this guide was conducted over several months by a team of analysts, consisting of more than 1,700 interviews with patent specialists across the globe.
Featuring 48 country-specific chapters, analysing local patent professional services markets and detailing the firms and individuals identified as leaders in their respective fields, the tables and accompanying detailed editorial reflect the depth of expertise, market presence and levels of work on which firms are typically instructed. The publication therefore serves as a one-stop reference source for anyone seeking patent services.
To read the full Mathys & Squire profile, and to view the rankings in full, visit the IAM website here.
In this article for Entrepreneur & Investor, we provide our insights into IP valuation and how this can be used as alternative financing for your business.
Companies, ranging from start-ups to SMEs, are frequently seeking a capital injection to sustain their business, and now even more so because of the significant economic impact currently seen worldwide due to the COVID-19 pandemic. With large numbers of businesses throughout the UK facing loss of income or even insolvency, there is a case to be made for the increased use or monetisation of the intangible / intellectual property (IP) assets held by such companies.
Traditionally, the value of companies has been largely based on their tangible assets – for example: buildings; plant machinery; production equipment; and vehicles, and as such, debt financing has been based on the value of these tangible assets. However, things are changing and the World Intellectual Property Organisation (WIPO) [1], UK Intellectual Property Office and the British Business Bank all recognise this [2].
Nowadays, the value of intangible assets / IP assets represents up to 84% of the company’s value [3] [4]. This shift is further seen at a larger scale as many developed countries, including the UK, have moved from largely production based to being service-based economies. This shift to a ‘knowledge-based economy’ has seen a commensurate rise in the use and importance of intangible assets, including IP, and with this a rapid increase in the UK wide investment in intangible assets – almost doubling between 1995-2015 [2]. This has the secondary effect that many newer companies, especially operating in the software developments space, have few tangible assets on which to base traditional debt financing.
While it is recognised that IP can be monetised by selling or licensing the assets, not all companies recognise the intangible assets they possess and even fewer recognise the potential of these assets as sources of untapped capital. These intangibles including trademarks, designs, trade secrets, know-how, databases, client lists, domain names and associated goods. The process of lending fully or partially against intangible or IP assets is also known as IP securitisation or alternative asset-based financing. This concept is a new arrival in a number of countries, including the UK, and has the basic premise of collateralising debt financing to SMEs and small companies by providing a security interest in the company’s IP assets [5]. With this in mind, and given the current dire situation in which many companies across the UK find themselves due to the COVID-19 crisis, there is a significant opportunity in raising awareness of the value of intangibles in a business and how to unlock this value.
In some cases, this can take the format of the financial institution gaining control of future license royalties for the IP asset in question, while others may effectively involve the purchase and lease-back or licensing of the asset from the financial institution. The IP securitisation or IP backed financing concept has already been trialled in a number of countries, with mixed results, but is still in its infancy in the UK with a relatively low number of financial institutes providing an IP backed financing service.
Those that have recognised this opportunity in the UK include:
Lombard
Lombard, which is part of RBS, offers an IP backed funding solution based on a business’ internally developed and owned software assets [6]. Under this solution, the software assets are sold to Lombard and the business then licenses the software back from the bank for a fixed term of three – five years, after which time the agreement can be extended and further financing provided or the IP can be transferred back to the SME.
Morgan Lloyd Trustees/Clifton Asset Management
This UK based pension administrator offers two products, the Self-invested Personal Pensions (SIPP) and Small Self-administered schemes (SASS), both of which will consider IP assets for investment [7]. In addition, a subsection of IP backed financing called pension-led funding may also be provided [8]. In this case, the pensions held by the SME are used to provide a capital injection, where the IP is used as collateral in a loan or is purchased by the pension fund and licensed back to the SME.
In all of the above, IP backed financing requires IP assets to be developed, owned by the company and free of any existing encumbrances or liens and not currently subject to any litigation action. In each case, in order for a loan or purchase and lease-back facility to be provided, the IP assets in question need to be valued by a third party, which has expertise in the area of IP valuation. For the most part, many current offerings in IP backed financing focus on software assets and the ability of management and founders to deliver returns based on their own know-how and the software assets.
As the valuation of IP assets requires knowledge of both IP and financial modelling, there are only an estimated 600 practitioners offering IP valuation in the UK [2]. This processes not only identifies the range of values under which the transaction should occur, but also helps businesses open their eyes as to how these contribute to the business and how their contribution can be further enhanced moving forward. In many cases, this takes the form of a review or audit of the IP assets to be valued.
While IP securitisation or IP backed financing is a very attractive offering and is likely to grow further under the current economic difficulties, problems still remain in wider roll out due to the risk involved. Some IP assets may not have easily realisable value outside of the business in which they were created, while there may be differences in the perceived value of the assets based on the methodology being used and the market conditions.
Ultimately, the valuation process is useful for businesses as it highlights where the IP assets add value to the business, and in doing so, ensures they are better prepared for negotiations and more likely to leave with a good deal.
This article was first published by Entrepreneur & Investor in June 2020.
—————————–
[1] WIPO, ‘The Securitization of Intellectual Property Assets – A New Trend’, 2020
[2]British Business Bank, ‘Using Intellectual Property to access growth funding’, British Business Bank Plc, Sheffield, 2018
[3]Raconteur, ‘Intellectual Property 2020’, February 2020
[4]J. P. Ogier, ‘Intellectual property, finance and economic development’, WIPO Magazine , February 2016
[5]OECD, ‘Enquiries into Intellectual Property’s Economic Impact – IP-Based Financing of Innovative Firms’, OECD, Paris, 2015
[6]Lombard, ‘Intellectual Property Funding,’ 2020
[7]Morgan Lloyd, ‘Products – SIPPs’
[8]Clifton Asset Management, ‘Clifton Asset Management’, 2020
Many companies within the food and drink industry are searching for the most effective ways to reformulate their products in response to consumer demands for healthier consumables, along with the new sugar reduction guidelines which were published by Public Health England (PHE).
The required overhaul for many companies to meet these reduced sugar or sugar-free targets means that significant research and innovation continues within this sector.
Two companies working towards this end are Cadbury and Nestlé, who both launched healthier chocolate bars in 2019.
Cadbury reformulated the recipe of its classic Dairy Milk chocolate for the first time in 114 years, reducing the sugar content by 30% without including any artificial sweeteners, colours or preservatives. Reportedly, it took a team of 20 scientists, nutritionists and chocolatiers three years of research and testing to produce this new treat. Mondelez International, (parent company of Cadbury) has announced that the new recipe will remain a trade secret, however, it has been suggested that the reduction in sugar has been made possible by the inclusion of a plant-based fibre to provide a similar taste and texture to the traditional Dairy Milk chocolate.
Nestlé announced that it has been able to produce new chocolate bars containing no added sugar by including a natural sweetener based on mucilage (the white pulp surrounding a cocoa bean), a component which is typically discarded in traditional chocolate-making processes.
Nestlé has also launched a new KITKAT containing the “Cacao Fruit Chocolate” in Japan and is now looking to expand this latest creation across the globe in 2020.
An excerpt of this article (below) was published in the December 2019 issue of Food Manufacture.
Generics and innovator sources from the pharma industry explain why documents from US and UK trade discussions do not point to the US trying to extend pharmaceutical patents
Pharma insiders from generics and innovator companies tell Patent Strategy that contrary to what Labour Party leader Jeremy Corbyn interpreted from the 450 pages of trade talk negotiations, the UK and Europe have longer patent monopoly rights for medicine than most of the world.
Last week, Corbyn accused the government of negotiating with US trade representatives to lengthen UK drug patents in a post-Brexit trade deal. The Labour Party leader said the trade documents give undeniable proof that the NHS will be “up for sale” after Brexit because prolonging patents will give US pharma drug companies extended market exclusivity in the UK.
“Longer patents can only mean one thing: more expensive drugs. Lives will be put at risk as a result of this,” said Corbyn.
He also said the trade talks give further credence to his accusations that the NHS is not safe in Conservative Party leader Boris Johnson’s hands, and that discussion to extend patent rights is proof the NHS is “on the table” in negotiations with the US if Johnson wins.
While lengthening patents would indeed lead to delayed market entry for generics companies and result in higher drug prices, a pharmaceutical industry source says that Corbyn doesn’t understand that patents do not control costs, and that drug prices are set by the National Institute for Healthcare and Excellence (NICE).
“There are two distinct issues here; one is the NICE side and one is the IP side. NICE is a price regulator and is separate from patents. NICE decides drug prices,” he says.
“The documents go back to 2016 and are a record of four or five meetings that really are the US side asking the UK to tell them about the SPC system, regulatory data system and patent system.”
He says a closer reading of the documents reveals that the IP discussions were simple exchanges of information between the two sides, with the US asking for more information about the EU SPC system.
The head of IP for a global generics company in Switzerland agrees and adds the documents show nothing more than a standard discussion between two countries in the first steps of a trade deal.
“We know the US has a different system and this shouldn’t be seen as the fault of pharma people. Some people are making it sound like this is big bad pharma doing something nefarious.
“It is most likely the US trade reps were putting forward their position on patent rights and patent law that don’t exist in the UK, but that is what the US would do in trade talks with any country,” he says.
Patent term length is controlled by the European Patent Convention and is similar to the rights granted by the US Code. For the UK to lengthen patents after Brexit, the government would have to change the current EU SPC system that grants extensions for some inventions that face regulatory approval before market entry.
But Martin MacLean, partner at Mathys & Squire in London, points out that the SPC framework is longer than the US patent term extension regime. “The EU SPC regulations goes up to 15 years, the US goes up to 14 years, so I do not see on what basis Corbyn is saying the US is trying to get the UK to extend patents.
“Both of us have patent extensions, we both have the same principle and the US gives a shorter maximum term, so I just don’t see how even if we were to accept the US system if would mean longer exclusivity on the UK market.”
The general counsel at a UK generics company says he believes Corbyn’s accusations that IP discussions are proof this government is willing to sell of the NHS to US companies are nothing more than political fear-mongering.
He says: “This is a cheap political move by Corbyn and bares no relation to reality. It is an extraordinary suggestion that the UK would change the patent system. Western Europe has on average patent rights that extend longer than anywhere in the world so it is the most favourable part of the world for originator companies.
“I find it an incredible suggestion that the UK would negotiate with the US to become the most favourable place for big pharma by maintaining monopolies longer and keep access to medicines from the population longer,” he says.
MacLean adds that one area of agreement between the two countries was the UK’s membership of the UPC, and that any modifications to the current patent system would jeopardise the possibility of the UK becoming or remaining a member. “The US stakeholders were in favour of the UK being part of that, and anybody worth their salt in Europe would also want to be part of that system,” he says.
“But changing our patent system would be madness, absolute madness. I don’t say impossible, but it would be crazy.”
Grace periods and data
One part of the trade talks that Corbyn did not highlight was the discussion about data protection rights for innovative drugs. The pharma industry insider explains the US has five years of data protection for simple molecules and 12 for biologics, while the UK has 10 years for both large and small molecules.
Data protection is important for innovator drug companies to protect their inventions in the rare circumstances that their patents are found invalid. But the pharma insider says that even though he believes trade talks focused heavily on data exclusivity rights, he doesn’t believe many molecules would be affected by changing the system.
“In principle, if we introduced a US style system for biologics, we’d gain a little but then lose for small molecules. Data protection is your backup in case you lose your patent, but most of the time you don’t need to rely on it because you have a valid patent,” he says.
The head of IP in Switzerland tells Patent Strategy that he doesn’t believe data exclusivity rights are a deal breaker for the US, especially since these rights are controlled by the EPC and not the UK.
“My sense is that talks about this are all standard posturing that the trade representative would take when they are kicking off trade talks with any country and that doesn’t mean the UK would accept any proposals.
“In the replacement for the North American Free Trade Agreement, Mexico did not accept the 12 years data exclusivity or patent term extension, and neither did Canada,” he says.
The trade documents do show that US trade representatives pushed for the 12-month application grace period for inventors who reveal parts of their discovery before filing a patent. This is a unique feature of US IP law and is not found in the EPC.
“There are many industries here in the UK that would see the grace period as a benefit, but any discussion about that would have to take place at the EPO,” says the head of IP.
Even if the US argued heavily for the UK to adopt a grace period for disclosure of inventions, MacLean believes that alone would not be enough for the UK to abandon the EPC.
“These documents are a very healthy discussion between two parties who want to get a deal done,” he says.
“It is madness to say this points to the NHS being up for sale because whatever rules the US pharma companies have to play by the UK companies would as well. I just don’t get it. This whole thing is a storm in a teacup.”
Hopefully, the storms won’t involve any more egregious misunderstandings about IP.
This article was first published on Patent Strategy in December 2019.
In this article for Intellectual Property Magazine, Mathys & Squire associate Max Thoma comments on Shnuggle’s suit against US rival Munchkin.
The Intellectual Property Enterprise Court (IPEC) has sided against UK baby product maker Shnuggle, in a high-profile design case.
IPEC dismissed Shnuggle’s suit against US rival Munchkin on 22 November, after it found it had made an error in preparing its initial application.
Shnuggle reportedly filed simple computer-generated images rather than properly prepared line drawings, which in turn made it difficult to enforce its design rights against Munchkin.
The error saw its later filed design invalidated in the case, due to the earlier error.
Mathys & Squire’s Max Thoma suggested Shnuggle “could have been in a stronger position had they filed a more considered initial registered design application based on properly prepared drawings, rather than simply filing CAD images of an early version”.
He said the ruling “seems to indicate that the differences between [Munchkin’s] Sit & Soak product and the Shnuggle designs would have in any case been too great for a registered design infringement claim to succeed.”
Thoma continued, “In legal terms, this case provides some clarification on the amendment made to the law on unregistered design right by the Intellectual Property Act 2014, in that the judge ruled that a “part of an article” which can benefit from design right does not necessarily have to be a separate component.
“Despite Shnuggle showing that part of their design had been copied, they failed at the final hurdle to show unregistered design infringement as the judge ruled that not all of the part had been copied,” he concluded.
Background
Shnuggle filed suit with the High Court against rival Munchkin in September, asserting it copied two registered Community designs.
The company sought an injunction, claiming the US competitor intends to import and sell in the UK and EU its Sit & Soak (S&S) baby bath.
“The shape of the S&S is the same or substantially the same as the shape of each of the Shnuggle designs,” the litigation stated.
This article was first published in Intellectual Property Magazine in November 2019.
Last week many of us were excited to learn of Franky Zapata’s achievement in crossing the English Channel on a jet-powered flyboard. If you haven’t yet seen footage of the flyboard, click here to watch a full video of it in action. Whilst flyboards have been around for a few years now, this recent breakthough is a standout achievement, as it also involved a mid-air refuelling stage during the cross Channel flight.
The team at Coller IP is frequently sought out to answer questions about innovations. In this case, we wondered: are there any patents behind this fantastic flyboard? The answer is: yes, including US Patent filings US20180208312A1, Systems and Methods for Improved Flight Control, and US20190161188A1, a Device for Propelling a Passenger (an image of which is below – figure 2A).
In fact, there are a range of flyboard patents by Franky Zapata, but this article will focus on the turbojet implementation. The patents also provide for a seated version of the device – i.e. a hoverbike variation (perhaps reminiscent of the Speeder Bike from Star Wars). We expect this version will allow more fuel to be carried, thus enabling longer journeys to be made.
Are there other patents like this? If so, what are they like? In our analysis, we found that most patents in this relatively small sector are currently focussed on propeller technology or use some form of water thrusting. Other jet patents tend to focus on jetpacks where the jets are located on the back of the user. One propeller example is from Canadian company Skykar (US20140097290A1):
Elsewhere, in China, the Jiangsu Digital Eagle Technology Company has developed a “Flying Skateboard” (US10245500) as shown below:
Larger companies have few filings in this sector, with Toyota being an interesting exception (US6969027):
Toyota’s focus on the vertical take-off and landing apparatus (shown above) demonstrates its commercial interest in this sector. It also shows that there is scope for innovation beyond the transport mechanism itself –i.e. a structure that assists flying users to land safely without injuring themselves, as it seems that landing can often be a challenge for such devices.
Returning to intrepid inventor Franky Zapata, he has been actively filing patents for many years, beginning in circa 2012. His first patents related to thrusting a passenger into the air using water (where the water used is below the elevated person). While this is undoubtedly great fun, it is limited by the requirement to use the device over water. Commercially, we note that earlier Zapata inventions have been kept under the control of the ZipH20 and Zapata Holding companies, while his latest patents are filed by ZipAir. This multi-company strategy makes sense as the market for water thrusters is very different from the much wider and more substantial market opportunities presented by the turbojet thruster.
Conclusion
Whether we are looking for a faster way to travel or simply because we want to whiz around as if we are using a hoverboard in Back to the Future II, it is hard not to admire the flyboard. One word of caution though is that just like any technology, it can be used for good or bad. On Bastille Day, Franky Zapata could be seen toting a rifle as he flew around Paris. While on the one hand an agile, hovering soldier could be useful, particularly if you need to enter or exit a conflict zone quickly, the idea of a terrorist or criminal using such technology is concerning. As for the patents, we fully expect that Franky Zapata will continue to develop exciting innovations to create new options for personal transport and look forward to following his work in this area, as well as the work of other innovators in this sector in the coming years.
If you have an IP strategy project that you need expert advice on, speak to a member of our team today. Our experts can provide you with detailed information about any industry (not just relating to flyboards!), as well as your competitors and what they are working on in this area.
