Making the Most of Funding for IP

Times are tough out there for young life sciences enterprises, particularly within the UK, as it appears that funding is significantly less available than in previous years. Several of our clients report that they are devoting more time to their efforts to secure Series A or Series B funding.

Whilst it is best to remain optimistic that this lull will be short-lived, in times of financial constraint, a company may have to make tough choices to protect existing intellectual property (IP) and cost-efficiently manage emerging IP. When your IP budget is constrained, how can you ensure your IP is safe and secure? This article aims to provide some useful and practical guidance on how to manage your IP budget cost-effectively.

As a first step, keep in mind that although making savings on your IP budget is essential, it is crucial not to sacrifice the quality of your IP protection. IP is critical to a company's valuation and is likely to be a young life science company's most valuable and significant asset.

Additional recommendations include:

Evaluate the IP portfolio frequently. To reduce maintenance expenses, identify outdated or unnecessary IP assets. As time progresses, the IP asset with the highest value may shift. For example, once a company has produced some product-specific IP or obtained its first round of funding, foundational IP, which served as the basis for the company's start-up, may lose some of its significance. From our experience, these early IP filings, possibly filed on a budget by a university, may not be the highest quality and might have trouble during prosecution due to overly broad claims or a lack of exemplification. Companies should consider how much it costs to prosecute and maintain their foundational IP - is this still justified in all territories? Investor expectations may need to be managed here.

Emerging IP. Rather than attempting to protect everything, identify and concentrate on protecting the most valuable IP assets. Consider cost-effective alternatives to patents for IP protection, such as trade secrets.

Priority patent applications. Priority patent applications are typically filed first to enable companies to evaluate their invention's commercial viability for a year before committing to the more expensive national or Patent Cooperation Treaty (PCT) applications. However, it is feasible to abandon and refile the priority application at a low cost if a company is uncertain of its commercial viability or does not have funding available (provided no publication has been made by the company or others). A company may employ this strategy more than once, but there is always the risk of a competitor filing a patent application for the same or similar invention.

Delay maintenance fees. A company can defer some costs by delaying the payment of maintenance fees. But be mindful of the consequences, including the potential loss of patent rights and late payment penalties. This tactic is most useful if waiting for funding to be released.

Delay patent prosecution. In most territories, extensions of time are available for responding to office actions. Extensions can be obtained in Europe without payment fees of up to six months. USPTO extensions of up to three months are also available with the payment of escalating fees.

Utilise internal expertise. Establish some internal patent expertise so that someone in the company is designated as the patent specialist. By compiling technical data and communicating with the external patent attorney, the designated patent specialist is particularly beneficial during the patent drafting phase, helping to streamline and lower the overall cost of the procedure. Before engaging with a patent attorney, we recommend undertaking preliminary patent searches to discover prior art, as this can save the company money on concepts that may not be patentable.

Streamline IP processes. Optimise internal procedures, such as a standardised invention disclosure process, to reduce the time and effort required for IP management.

United States Patent and Trademark Office (USPTO) fee reductions. Companies must ensure they are paying the correct filing and upkeep fees. Nearly all small and medium-sized enterprises (SMEs) are eligible for small entity status unless they have licensed their IP to a large entity. If a company meets the requirements, it ought to benefit from micro-entity status, which provides an 80 percent reduction in fees for patent maintenance and applications.

Utilise government programmes and grants. Explore government programmes or incentives that could reduce the costs of IP protection or provide grants to cover IP costs. For example, the Cancer Moonshot Expedited Examination Pilot Program of the United States government, commonly referred to as "The Moonshot Programme," offers fee reductions and expedited examination of patent applications in the areas of oncology or smoking cessation that have an eligible method claim, such as immunotherapy-based cancer treatment methods. Through Innovate UK (ukri.org), UK government grants provide modest funding for an initial IP audit and additional funding that may be applied to an initial patent filing.

Execute a cost-benefit analysis. Prioritise IP actions with the highest potential return on investment (ROI) by evaluating the potential ROI for each action, such as filing a new patent or trade mark.

Monitor the IP budget. To identify areas of cost-saving, companies should track and analyse their IP budget on a regular basis. Ideally, it is wise to collaborate with an IP firm that can assist you in creating an annual forecast.

Negotiate fees. Negotiate fees with IP attorneys, particularly regarding ongoing maintenance and patent drafting. Be careful not to compromise on quality in this case. Once the patent application is filed, errors or omissions made during the patent drafting phase are typically irreversible.

Reduce ongoing IP costs. Work with an IP firm with specialist expertise in working with growing companies in the life science sector and who will talk to you to understand your business needs, instead of generating fees for lengthy, complex emails filled with legalese.

In summary, to effectively protect the company's inventions, it is crucial to strike a balance between cost-saving measures and a robust and comprehensive IP portfolio. For life sciences companies, IP is the most significant asset. To maximise the value of IP rights and, therefore, the company, consulting with a commercially focussed IP firm is essential when navigating these strategies.