Friday 22 January 2010

When Proprietary Harry Meets Generic Sally

I recently had lunch with a UK colleague with a distinguished background in patent litigation matters, in general, and pharmaceutical-related litigation, in particular. During the conversation he confirmed my understanding that, as far as client representation was concerned, you either represent proprietary pharmaceutical companies or generic manufacturers, but not both. The thrust of the position is that there is a type of IP Continental Divide, where the headwaters either flow in a proprietary or a generic direction, but never come together under the same corporate roof.

His comment led me to recall a chapter published over a decade ago by my late colleague, A. David Cohen, entitled "The Intellectual Property Characteristics of a Generic Company", in Intellectual Property in the Global Market Place (2nd ed. 1999), edited by M. Simensky, L.G. Bryer and (full disclosure) N.J. Wilkof. A. David Cohen served as the Manager of the IP Department at one of the world's largest companies in the generic patent protection industry.

The particular focus of the chapter was an effort by Cohen to describe how this company, despite its historical commercial raison d'etre in manufacturing and selling "plant protection chemicals initially developed by a different (usually) research-based company, but after the plant patent has expired," was in the process of evolving into a research-based plant protection company. As set out by Cohen, it is worth noting the salient differences in IP protection during each of these stages in maintaining the company's the patent protection business.

Generic Stage
1. The company focuses primarily on assessing the validity of patents to avoid infringement and assessing the extent to which use can be made of the patents.
2. If the company does file patents, it is usually for processes; only later might patents also cover formulations.
3. The company is active in oppositions of patents and will seek compulsory licences when possible.
4. The company is also involved in invalidation proceedings regarding patents that cover products that the company wants to commercialize, oftentimes with an eye towards obtaining a license.
5. The company has a strong interest in taking full advantage of the experimental use exception, if applicable, for existing patents.
6. The company vigorously challenges patent term extensions.
7. The company at a later stage of its generic-focused activities will engage in a "picket-fence" strategy to block the proprietary product beyond its basic stage (the company will run experiments "and file one or more patent applications covering either a new process to prepare the product, a new process to prepare a key intermediate, selected mixtures, new formulations and/or new uses").

When the Picket Fence Strategy is Breached

Interim Stage
1. The company faces the prospect of declining market share, as more companies enter the generic space and the larger multinationals acquire smaller generic companies.
2. To maintain sales, the company shifts from selling not only its own technical material but also its formulated material, leading to patenting of the formulations.
3. Because of the distinctive nature of agribusiness, the company obtains agricultural registration for its products on a country-by-country basis.
4. The company is less active in seeking compulsory licences, engaging in invalidation actions, or in challenging patent term extensions.
5. The company begins to view patent protection as a means for protecting its commercial interests.
6. The company strengthens its patent validity activities and the implementation of its picket fence strategy.
Proprietary Company
1. The company engages in fully-fledged R&D to develop proprietary products and/or licensing-in proprietary technology for product development.
2. The company maintains a patent registration program to protect its own proprietary products.
3. In so doing, the company must decide on whether to include in the first basic patent, as well as the product itself, all known uses, alternative processes and synergistic mixtures.
4. This requires the company to consider both patent prosecution costs and up-front research costs as well as to weigh the risk that a comprehensive patent whose filing is delayed to assure its comprehensiveness may allow a competitor to sneak in with its own prior application.
5. The company begins to find ways to counteract the picket-fence strategy of others.
6. The company actively supports patent term extensions to provide additional protection for its products.
7. The company seeks the optimal way to balance the existing generic business with the emerging proprietary emphasis and to maximize the joint revenue from both.
What arises from Cohen's discussion is the dynamic nature of these processes. In his own words,
"... the generic company's attitude toward and its experiences with intellectual property may both prepare and push it toward becoming a research-based company."
If that observation was true a decade ago, it is even more so now. Even the world leader in the generic pharmaceutical business, Teva Pharmaceutical Industries, is also an active participant in the commercialization of proprietary products.

The upshot is that the generic/proprietary divide in the pharmaceutical industry seems less and less germane, if it all. Unless, of course, you are engaged in patent litigation. There, even as your client is constantly searching for ways to achieve the right generic/proprietary mix for its own business, the approach to litigation, perhaps out of necessity, perhaps out of legacy, continue to take a Manichean view of the pharmaceutical world.

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