Unlocking Opportunities: How the Unitary Patent System Benefits Life Sciences SMEs
An Interview with Ian Bryan
The introduction of the Unitary Patent System marks a pivotal shift in European patent law, offering significant advantages for small and medium-sized enterprises (SMEs) in the life sciences sector. Ian Bryan, a seasoned patent attorney and founder of Assimilate IP, emphasises that this new framework enables SMEs to navigate patent protection more effectively across multiple jurisdictions. This article explores the key differences between traditional European patents and the new unitary system, highlights the impact on patent strategies for SMEs, and provides essential insights on managing patent portfolios and licensing agreements in a competitive landscape.
Ian Bryan
Founder, Assimilate IP
Can you explain how the unitary patent system differs from traditional European patents, and what advantages it offers for companies operating across multiple jurisdictions?
The Unitary Patent System, which came into effect in June 2023 with the introduction of the Unitary Patent (UP) and the Unitary Patent Court (UPC), is the most significant development in European patent law in decades. It is hailed as a great success, with more than 36,000 UPs registered by the European Patent Office (EPO) by October 2024 and more than 500 cases initiated before the UPC.
The System aims to provide a simpler, cheaper process for the validation and renewal of European patents, and, by means of a centralised court, gives legal certainty in patent disputes.
‘Classical’ European patents are granted by the EPO and provide the proprietor with a bundle of national patents that must be validated in each of the member states in which the patent is to take effect. This is an expensive and complex process, involving many national patent offices, translations, and costly renewal fees. Furthermore, patent disputes such as enforcement or revocation actions must be brought before national courts, with each court’s decision only having effect in that state. This leads to parallel litigation across member states, which is extremely expensive and unpredictable, as the different courts may come to conflicting decisions.
The UP (or European patent with unitary effect) overcomes these problems by enabling proprietors to obtain uniform patent protection for all territories of the EU Member States participating in the system (currently 18) more simply and at a greatly reduced cost. Instead of having to validate their European patent in several states, proprietors can file a single request for a UP with the EPO, which acts as a centralised office to administer the process and fee payments. The renewal fees for a UP are also greatly reduced, the total cost of maintaining the patent for 10 years being less than €5,000.
The UPC is a supranational court set up under the UPC Agreement, with jurisdiction over UPs and classical European patents that have been validated in the member states participating in the agreement (i.e. those which have not elected to ‘opt out’ of it).
This centralised, specialist court provides a new forum for enforcing and challenging patents in Europe. The court has significant powers and can grant pan-European injunctions in enforcement actions or revoke patents across all participating member states.
How has the introduction of the unitary patent system impacted patent strategies for SMEs, particularly in the life sciences sector?
Early indications are that SMEs are embracing the Unitary Patent System and the benefits it offers in terms of cost, simplicity, and the centralised Unitary Patent Court (UPC), with almost a third of applications for Unitary Patents (UPs) originating from SMEs in 2024.
Although there were concerns that life sciences and, particularly, pharmaceutical companies would avoid UPs and the UPC because of the risk of central revocation of their most valuable patents, the 2024 statistics seem to show otherwise. Requests for UPs in the biotech and pharmaceutical fields (33.9% and 32.9%, respectively) were among the highest in any technology area. Indeed, the proprietor with the highest number of UPs is the pharmaceutical company Johnson & Johnson.
Similarly, the UPC has been very active, with more than 400 infringement and revocation actions filed since June 2023. While the majority involve large enterprises, others originate from SMEs that could not afford pan-European legislation but find the UPC a more cost-effective forum to enforce their rights.
It is still rather early to draw too many conclusions from the data, but the initial signs suggest that a significant number of SMEs are attracted by the benefits the Unitary Patent System offers in terms of cost, broad territorial coverage, and pan-European enforcement.
What challenges do life sciences companies typically face when assessing freedom to operate, and how do you guide clients through this complex process?
Freedom to operate (FTO) is the ability to make or use a product, service, or technology in a particular territory without infringing a third party’s IP right, such as a patent, trademark, or design. Having FTO is, therefore, critical for any company planning to launch a new product or service, particularly in highly competitive and patent-intensive sectors like life sciences.
My advice to clients is to conduct a thorough FTO search and analysis early in the research phase, particularly as they begin to define their new product or service, to allow time to develop a strategy to deal with any blocking IP rights they may find. Their strategy may involve ‘designing around’ any patent claims, negotiating a licence, or even challenging the patent. A senior manager should be made accountable for leading the project team, which should ideally consist of a senior technologist and a patent attorney.
‘Designing around’ the patent claims involves modifying the product or service so that it would no longer infringe. A patent attorney should be involved in agreeing to the modification to ensure the new version would clearly fall outside the scope of the claims. Equally, any modification should retain the competitive features of the new product or service.
If negotiating a licence is the favoured route, allow time to conduct internal due diligence and develop a licensing strategy before approaching the patent owner.
In some situations, challenging the validity of the patent may be considered prudent. Typically, this would involve searching for new prior art documents that had never been considered in examination to attack the novelty or inventiveness of the patent claims. The prior art could be used defensively, should the patent proprietor threaten action against you, or offensively in a revocation action. If the latter, a decision should be made as to the best forum for the challenge (e.g. the Opposition Division of the EPO, the UPC, or the national courts).
In your experience, how important is patent licensing for SMEs in the life sciences, and what factors should they consider when negotiating licences?
Licensing can be extremely important for SMEs in life sciences, either from an FTO perspective or as a means of generating revenue. Many SMEs in-license patents for FTO for their products or services, while others out-license their patents to generate income because they lack the resources to exploit them.
It is essential that SMEs considering either in- or out-licensing patents conduct their due diligence before approaching patent proprietors or potential licensees.
SMEs considering in-licensing IP should be clear that they do require a licence under the patent(s). Some of the key questions they should consider during due diligence include: Are the patent(s) in force? Are they valid? Is it possible to ‘design around’ the claims? Do they need an exclusive or non-exclusive licence? And, perhaps most importantly, what is the maximum price they are willing to pay for any licence?
SMEs as potential licensors should consider whether they are willing to grant exclusive or non-exclusive licences, how much control they need to maintain over the patent portfolio, what restrictions on the licence are non-negotiable, and critically, the minimum income they would expect from the licence.
How do you approach supporting SMEs in managing their patent portfolios effectively, especially with limited resources?
Before you can support an SME in managing its patent portfolio, you need to understand its IP strategy and the significance of the patent portfolio within it. If the SME does not have an IP strategy, then you should assist in formulating one and agreeing on a process for implementing it. The patent portfolio may be only one of its IP assets; others, such as trade secrets, designs, copyright, and trademarks, may be equally as important.
The next step is to review the patent portfolio with the technical and business teams to understand which are the most important patent families and markets, what stages of examination/grant each family member is at, and if there are other patentable ideas in the pipeline. The filing strategy, particularly the international filing strategy, should be agreed upon to ensure the key commercial markets are covered.
At this stage, it is important to give the leadership team a health check on their portfolio and agree on what actions are necessary to improve it. For example, it may be that securing early grant of a particular patent family member is a priority, perhaps to attract funding from investors. In this situation, you would recommend taking steps to accelerate the examination of the patent applications before the EPO, the UKIPO, and the USPTO.
Other issues, such as FTO, may have been identified in reviewing the portfolio, and these should be highlighted to the leadership team together with any proposals to mitigate risk.
IP policies and procedures, such as invention capture processes, invention review meetings, and inventor remuneration, are all areas where the SME may require support.
What trends are you observing in the life sciences patent landscape, and how should SMEs position themselves to stay competitive in this field?
Patenting activity in life sciences remains buoyant. There were more than 8,000 biotech patent applications filed with the EPO in 2023, representing a 6% increase compared to 2022, and a further 9,000 applications for pharmaceutical patents.
Licensing deals are another indicator of patent activity and commercial interest. According to ‘JP Morgan’s Annual BioPharma Licensing and Venture Report 2023’, there were almost 500 R&D partnership in-licensing deals in 2023, involving $12.8 billion in upfront payments alone. Cancer was by far the therapy area of most interest, while biologics, such as antibodies, were the favoured modality, outstripping small molecule deals twofold.
My advice to life sciences SMEs is simple: ensure they have an IP strategy in place that is fully resourced and actively managed by an IP manager who is accountable for implementing and delivering the strategy. ‘IP updates’ should be a fixed agenda item in the leadership team’s monthly meetings.
Competitor intelligence, invention capture, patent filings, foreign filing strategy, portfolio reviews, FTO, trade secrets, IP training, and licensing are areas that require continual attention in maintaining a healthy portfolio and delivering the IP strategy. Ignore them at your peril!
How can a robust freedom-to-operate analysis help SMEs mitigate risks and avoid costly litigation, particularly in the highly competitive life sciences sector?
An FTO analysis is a risk mitigation tool aimed at avoiding time-consuming and costly litigation. Discovering a blocking patent just before launch or being served with a cease-and-desist letter from a litigious patent owner can be devastating for resource-constrained SMEs, especially in the litigious life sciences sector where exclusivity is key.
The FTO analysis should not only minimise the risk of costly litigation but can also be used to reassure investors. The analysis can prove a rich source of technical and competitive information and can even identify potential licensees and/or partners.
Conducting a robust FTO search and analysis early in the R&D phase will help define the product or service offering and allow time to devise a strategy to avoid any blocking third-party patents. As highlighted above, this may involve redesigning the product or service so that it no longer infringes the patent claims, negotiating a licence, or challenging the patent. The strategy may involve pursuing two of these activities in parallel.
What advice would you give to startups regarding early-stage patent protection and the importance of securing licensing agreements?
Life sciences startups should not rush into filing patent applications but should think carefully about their IP strategy, which may include other IP rights. It may be that trade secret protection would prove more valuable than patent rights, depending on the technology and product lifetime. Patents, patent applications, and trade secrets can all be licensed to third parties if generating early revenue is key to the IP strategy.
If patents are the most appropriate form of protection, then early filings could be critical, provided there is sufficient experimental data to support patentability. This is particularly important in life sciences, where experimental results, such as physical-chemical data and biological test results, are required to support the patent claims. In this respect, the use of the priority system to allow extra time for experimental studies throughout the convention year should be considered. SMEs should be cautious about filing any patent applications before they have supporting data, as there is a risk that the application will be refused for lack of sufficiency. If this does happen and the application is published, then they will have disclosed their invention without being able to gain any protection.
Generally, a patent proprietor can expect to negotiate more favourable financial terms from a licensee for a granted patent than for a pending application. However, one advantage of securing a licence agreement for a patent application could be to have the licensee pay all the prosecution fees.
A first filing at the UKIPO is attractive due to the modest costs, quality of the examination, and speed to grant, which will be particularly important for SMEs seeking to license their IP rights. Accelerating the examination and, hence, patent grant can also be requested before the EPO and the USPTO.
Other factors to be considered are the key territories for filing and whether to file directly in these countries or allow more time to assess the patentability of the invention and its commercial value by using the ‘PCT/international’ route.
ABOUT IAN:
Ian is a PhD biochemist, a European and UK patent attorney and founder of Assimilate IP which provides IP training and consultancy services. With more than 25 years of experience as an IP professional, working both in private practice and in-house in healthcare, he specialises in supporting SMEs, particularly in the life sciences sector. Ian takes pride in helping clients develop their IP strategy, manage their patent portfolio, conduct freedom-to-operate analyses, and license their IP. He is also a firm believer that a thorough understanding of IP principles is essential for anyone in a leadership or advisory position for tech-based companies and enjoys giving open and in-house training.
Contact:
Ian Bryan
Founder, Assimilate IP
[email protected]
Tel: +44 777 616 0259
www.assimilateip.com