By James Huie and Dennis Fernandez

Abstract
This paper presents a brief overview of intellectual property rights (IPR) and systems biology. After introducing the basic disciplines, issues, and market surrounding systems biology, the paper will discuss some relevant IPR complications concerning systems biology software. Technology transfer, including licensing and business agreements, are not covered in this paper.

Intellectual Property Overview
Some find the concept of intellectual property hard to grasp, often because it’s hard to determine the monetary worth of ideas. One simple example of the value of intellectual property is the common occurrence of expensive and high-stakes infringement lawsuits. One of the costliest examples is the decades long case of Eastman Kodak vs. Polaroid, which resulted in the destruction of Kodak’s instant photography business, as well as more than $3 billion dollars in infringement damages, compensation and legal fees, and research and manufacturing costs. Even lawsuits that result in settlements, such as that filed by the University of California against Genentech for the company’s manufacture and sale of the growth hormone product ProtropinR, can be severe ($200 million in the case of UC vs. Genentech) punishments for the defendants. That is not to mention the hundreds of thousands of dollars lost by both sides on legal and courtroom fees and on time spent by employees and management embroiled in the suit.

Although successful suits filed by small companies can result in large settlements or infringement damages from industry juggernauts, companies without the proverbial ‘deep pockets’ typically do not have the time and money to spend on lengthy, costly litigation. The price of resolving patent disputes can sometimes cripple a business, compared with the modest cost of building an effective IP portfolio.

In addition to preventing costly litigation, licensing a strong IP portfolio can yield significant returns. The well-known Cohen-Boyer recombinant DNA patents, often credited as key catalysts of today’s biotech industry, were reported to have earned $37.3 million in licensing royalties in 1997 alone.

While U.S. legislation such as the Bayh-Dole Act allowed for transfer of ownership of many government funded inventions from the U.S. government to the universities resulting in successful licensing of almost half of university-born inventions, the fact is that an estimated 3% of all patents are actually licensed. Thus an effective IP prosecution strategy should consider the competing demands for licensing revenue and defense from litigious competitors. While well-written patents are needed to defend a company’s core technologies, an aggressive patenting strategy is needed for the ultimate objective. Company objectives can be to license or sell their IP portfolios, prevent unwanted litigation, increase company value for acquisition by larger entities, or attract investment by venture capitalists.

This paper presents a brief overview of intellectual property rights and the intersection of systems biology with IPR. Startups and their investors would be interested in perfecting an IP portfolio for eventual acquisition, whereas manufacturers and customers would be interested in licensing agreements. Rather than covering technology transfer, including licensing and business agreements, this paper will focus on patent prosecution issues related to the emerging field of systems biology software.

Patents
United States patents offer protection for any process, machine, manufacture, or composition of matter, or any improvement thereof, that are novel, useful, and non-obvious. The Agreement in Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreements) in 1994, a multilateral concord proposed by the council administering the WTO’s intellectual property agreement, defines patentable matter as any invention that involves an innovative step and has a potential industrial application.

In theory, the purpose of intellectual property is to foster intellectual and economic growth. Patents spur innovation through the disclosure and teaching of the details of an invention to the public, and in exchange, the inventor or owner is rewarded the legal rights of ownership. The legal rights give the owner exclusive rights to capitalize on the invention, by excluding others from making or using the invention, importing the invention into the U.S., or offering the invention for sale. These ownership rights are granted for a period of 17-20 years, depending on the date of filing of the patent.

Patents are obtained through a lengthy process that can sometimes turn out to be quite costly. In high-tech fields such as systems biology and software, the time between filing a patent and a first response from the U.S. patent office is typically a year and a half. This is due in part to the large volume of patent applications in these fields, and to the lack of expertise in the patent examiner corps.

As far as timely filing patents, Europe, Japan, and the Pacific, apply the “first to file” system. On the other hand, the U.S. applies the “first-to-invent” system, requiring an inventor to file an invention within one year of disclosure before the invention becomes public domain. Therefore, a company must be wary of offers for sale and other public disclosures that may spur the one year time limit.

Copyrights
Copyrights protect the original expression of an idea. By offering protection, copyright encourages the expression of original, artistic ideas into a tangible medium. Legal protection is effected instantly, when the original copyrightable subject matter is fixed into a tangible medium, e.g. on paper or in a digital storage form.

Copyrights are free and do not require months of paperwork as do patents, and they are valid for the author’s lifetime plus 50 years. A longer period of validity (75-100 years) applies if the work was created for hire, which is generally the case in a business such as the biotech industry.

While being cheaper and having a longer protection time, copyright protection in systems biology and software is extremely vulnerable to reverse engineering. Copyrights only protect original work from literal copying; but they do not prevent a competitor deriving the same or similar invention from the original work. Given the resources from systems biology giants such as IBM, patents would be more ideal to protect a company’s most important works.

Trade Secrets
Trade secrets are any technical or business information that give a company a competitive advantage. There is no formal filing procedure to register trade secrets. The secret need not be completely novel or exclusive, it simply must have a derived or potential economic value from being unknown. While the concept of trade secrets seem simple enough, companies should make reasonable efforts to keep the information secret, e.g. through the inexpensive use of Non-Disclosure Agreements (NDA). Legal protection under trade secret no longer applies when the information is publicly disseminated.

Trademarks
Trademarks refer to the distinctive signature mark that can be used to protect the company, product, service, name, or symbol. The trademark must not be descriptive or generic. Legal protection is not offered to the technology, rather to the company good will and quality associated with the use of the recognized name or symbol. Trademarks provide exclusive rights within a region or nation and as long as used commercially, and they may be renewed indefinitely. Compared to patents, they are obtained within a moderate time period (usually under two years) and typically at a cost under $5K per registered mark.

IP Strategy
The IP rights are protected under various federal and state laws. Without protection, intellectual property falls into the public domain and may be used by any party without license. A sound management strategy would be to systematically build a portfolio consisting of different IP rights, with the aim of protecting the various aspects of the company’s technology and commercial interests.

IP rights protect the commercial interests of a company at the various stages of design, manufacturing, and product operation. At the design and development stage, copyrights and trade secrets can be immediately enforced. Novel apparatus and methods can then be patented, a process that takes about three years and requires the investment of some funds. Once a product or service is developed, issued patents and trademarks protect the technology and associated names and symbols. Early patenting of inventions or methods is beneficial to the company for a number of reasons. Generally, the first to patent will have the best chance of winning the broadest patents. Furthermore, issued patents increase a company’s value, which attracts investor capital for further development.

Systems Biology
The traditional methodology in biotechnology research has been a reductionist approach, which studies separate cellular components independently to determine their individual functions. After full understanding of an individual component, the individual functions are pieced together to determine the intra and intercellular relationships and overall function. The flaw in this approach is that it has been extremely time consuming and neglects the true complexities of the concerted biological system.

Rather that examining individual disciplines separately, systems biology first takes an integrated approach of analyzing proteomics, genomics, computational chemistry, pharmacogenomics, bioinformatics, and other complex computational analytical techniques together to comprehend the logical and physical organization of the biological system as a whole. Systems biology uses a range of interdisciplinary tools such as chemistry, informatics, math, computing, engineering, and molecular biology. These tools monitor how precise, systematic alterations in genetic and/or environmental factors cause changes in the overall biological system. The smaller molecular interactions and downstream biological effects can be better understood after analyzing the overall response of the biological system. Thus systems biology complements the traditional reductionist approach by bringing in a global biological perspective.

The Disciplines that Comprise Systems Biology
The field of systems biology’s can be split up into genomics, proteomics, computational chemistry, and pharmacogenomics disciplines (See Fig. 1).

Genomics and proteomics apply computational software to determine structure, function, and intermolecular interactions respectively to the genome and proteome. The genome is the aggregate of all genes within an organism while the proteome is the complimentary collection of all proteins within an organism. Therefore genomics and proteomics studies are based on the native structures within the organism.

Computational chemistry examines the drug or therapeutic aspect using computational software. Using complex algorithms and comparative databases, a particular drug’s composition and molecular structure are optimized for the best therapeutic response with the least harmful side effects to the general human population.

Pharmacogenomics could effectively be applied in the FDA clinical trial stage. Pharmacogenomics uses software to increase the effectiveness of drugs and minimize their side effects by matching appropriate drugs to people according to their specific genome. Thus, systems biology is an umbrella term for the interrelated bio-IT disciplines.

Relevant Issues within Systems Biology
The systems biology field is not particularly in need of methods to collect the actual information within the relevant disciplines. Instead the field is overwhelmed with data and needs coherent, useful databases and software to interpret the meaning of the massive volume of bio-IT information. Another need is for standardized data and software between the bio-IT disciplines, to enhance an integrated and efficient understanding of the human system. At the present, there is a multiplicity of software, each with its own biological models. Finally there are many other smaller issues that may create niches for bio-IT companies to thrive in.

Impact of Systems Biology
The biotechnology and pharmaceutical field will benefit exponentially from the integrated approach, as systems biology logically rules out many unfeasible experimental scenarios. This allows researchers and biotech companies to focus on the promising molecular relationships and therapies, saving millions of dollars and years of research. Advances in systems biology will impact multiple cross sections of modern society, including healthcare, pharmaceutics, biotechnology, the environment, academic research, the chemical industry, agriculture, and the government.

Securing Marketshare in the Systems Biology Field
Systems biology’s huge potential provides encouragement for biosoftware (bio-IT) companies to capture market share in this relatively new market. Each of disciplines within systems biology offers a potential market to bio-IT companies. Despite the large systems biology market, bio-IT companies face formidable competition. IBM is the major player in systems biology. By partnering with multiple bio-IT companies, IBM is the only company in the market that is comprehensively involved in the entire drug and discovery processes. Considering IBM’s prominent role, a bio-IT company strategically would want to increase their value by building a solid patent portfolio with possible goals of being acquired by IBM or its competitors; to partner with IBM or its competitors; or to gain sufficient capital from investors to face IBM head on. As a lesser indirect threat, nonprofit academics and government supported organizations offer less sophisticated bio-IT tools and databases for free over the internet. Taking into account the amount of work still needed to standardize data and software interoperability, along with the higher level of sophisticated software, public competition is less of a concern than IBM and other private companies. Therefore, there will be ample opportunity for bio-IT companies to compete in the systems biology market. The main tool to protect their software and to increase their company value is a strong patent portfolio.

Although the economy presently is in a downturn, investors will be looking to for secure investments once the market begins to recover. Because systems biology will be an integral player in the “biotechnology revolution,” investors and venture capitalists will be looking for secure bio-IT companies with a relatively ascertainable value. The quality of a company’s patent portfolio will be amongst the first factors that investors will consider in evaluating a bio-IT company potential.

Software Bio-IT Patents are Analogous to Traditional Software Patents
Software for collection, visualization, and prediction of molecular structure data are all becoming important means in the systems biology research process. For example proteomic software is used for predicting protein structure, by matching a partial protein structure to a known protein family of representatives stored in a database. Software patents for structure prediction or other systems biology computations are similar to computer software patents.

Patents Issues for Bio-IT Software Patents
As mentioned above, timely patent application filing is a key issue to address. Be aware of the US one-year time limit to file your patent after disclosing it publicly or privately. Disclosure may be simply marketing the systems biology software even though the product has not been prototyped. Japan and Europe patents should be filed before disclosure. If a company misses its patent application filing deadline, the patent will be public domain and will not be protected.

Along with timely application filing, prompt patent prosecution is necessary. US patents only provide 20 years of patent protection starting from the patent filing date. Therefore a slow prosecution process will result in shorter patent protection term. Bio-IT companies should closely with patent counsel to assure expedited office action responses. Also, there are possible time penalties on the enforcement period if one contributes to delays during patent prosecution.

Another major issue is obtaining a patent that is not too narrow in scope. If competitors can design around the patented software because its claims are too narrow, the patent is commercially worthless. Instead patents should be broadly written to assure competitors cannot design around the patent. A sophisticated patent prosecution is necessary to realistically block competitors through broad patents.

Perhaps a company is considering copyright protection instead of patent protection. Sometimes copyright protection is appropriate, in terms of costs, to protect some software such as computer programs, electronic databases, etc. Although copyrights are cost efficient, a competitor can legally reverse- engineer the function without literally copying the original work. Once the systems biology software has been reverse-engineered by a competitor, the innovating company has no recourse or protection for its innovation. Given copyrights’ vulnerability, patent protection is more effective in legally securing valuable software.

Whether copyright or patent prosecution, a bio-IT company should be concerned with co-ownership issues otherwise it could lose exclusive control over its IPR. Contributors may be co-owners of the invention unless specified up-front. Contributors can be employees, consultants, contractors, and even customers. Given the academic environment of the systems biology industry, cooperation with other entities can easily result in co-owned IP. A company does not want to lose its exclusive IPR’s inadvertently to small or unforeseen contributors. Unless the rights of such joint owners are specified up-front, for example by contract terms, then there is a problematic possibility that certain parties later may not only assert their partial ownership interest for royalties, but actually endeavor to offer licensing rights to other 3rd parties or even competitors.

Beyond co-ownership, bio-IT companies must be careful not to “willfully” infringe on other’s patents. Under U.S. patent law, one's awareness or willful state-of-mind about the existence and infringement of a competitor's issued patent may significantly affect their legal liability. Consequentially if a party is proven to be a willful infringer of a known patent, a court can punitively award the patent owner up to three times the normal recovery amount. This treble-damage exposure is so substantial, that company management should carefully avoid creating evidence of internal communications such as emails that may be construed later to indicate such willfulness state-of-mind. Additionally in many cases, it may be appropriate for company policy to discourage looking at issued patents owned by other entities. Also when a suspect patent is already known, management must take careful steps to refer the matter to competent patent counsel for appropriate analysis and opinion.

Conclusion
Systems biology will revolutionize the process of study of biotechnology and will substantially provide applications in multiple industries. While systems biology software has much room for improvement, it is important for companies to protect their valuable technologies and design. It is therefore important to for technology companies to work closely with their intellectual property counsel. Likewise an intellectual property and patent prosecution team must take a sophisticated and detailed approach to managing its client’s IPRs. Ideally a continuing relationship between the bio-IT company and patent prosecution team will prevent serious mistakes from occurring. An experienced and strategic patent prosecution team can capitalize on an individual patent and maximize overall company’s value.

Figure 1

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