Stretching Intellectual Property to Maximise Royalties

The life sciences sector has long embraced the use of licensing throughout the drug discovery pipeline, from the in-licensing of promising new compounds to eventual out-licensing of manufacture of the approved product. With increasingly diverse techniques now employed in the drug discovery process, licensing specific technologies and expertise is becoming ever more popular. For instance, a biotech company concentrating on innovation and research might also out-license access to its library of lead compounds relating to a particular target. This provides revenue for the biotech company for development of its own compounds, and establishes the relationship with Big Pharma for potential out-licensing deals in the future.

Some commentators believe the industry's love affair with licensing is set to become even more intense. Recent consolidation e.g. the merger of Pfizer and Pharmacia, they say, will inevitably lead to those products with smaller potential markets being out-licensed for development to smaller companies. Such merger activity could mark a new wave of consolidation towards ever-larger companies, increasingly dependant on blockbuster products, whether home-grown or in-licensed. Combined with the need to encourage innovation, particularly in the early stages of drug discovery, Big Pharma is becoming increasingly reliant on licensing deals with biotech to supplement its ailing product pipeline.

Given the increasing use of licensing IP in the life sciences sector, in this article we outline, from a licensor's perspective, some of the key strategies to consider in maximising long-term revenue generation. In the life science industry IP licences typically exploit patents and know-how associated with the patent. Other rights, however, such as registered trade marks, copyright and database rights should not be over looked. Each IP right is governed by different legal rules and all but trade marks expire after a specified period. In this sector the limited life of a patent is particularly restrictive. However, knowledge of the differences between each IP right coupled with skilful licence drafting can effectively stretch the licensor's revenue.

Generally in the UK patent protection cannot be extended beyond 20 years from the date the patent application was filed. This creates the obvious problem for patents relating to a drug which may take up to 10 years to obtain market authorisation. Patent legislation recognises this problem but only to...