Preventing Friendly Fire

Section I.N.? Patent Defense? ?Control, costs and allocation of recoveries associated with patent defense has evolved, as discussed earlier for patent filing, into a wide array of biopharma alliance behaviors.

For me, however, the most interesting aspect of patent defense arises from an unexpected quarter.? As a good friend and West Point graduate once told me “the tricky thing about ‘friendly fire’ is that you don’t usually see it coming.”? In the case of patent defense, biopharma alliances typically expect an IP assault to come from outside the partnership tent … until it comes from within.

In 2007, MedImmune successfully argued before the US Supreme Court that it could be both licensee (of the Cabilly II patent held by Genentech) and patent litigant concurrently.? Prior to this ruling, a licensee had to terminate or materially breach its license agreement in order to bring a suit challenging validity or infringement of a licensed patent.? The Court determined that a licensee has the right to challenge a patent’s validity, and such right was not forfeited upon signing a license agreement.

Since the MedImmune decision, biopharma alliances have adopted a range of protective provisions as a disincentive to the licensee choosing to challenge the validity of a licensed patent.? These have ranged from termination upon challenge clauses to royalty adjustment provisions.? However, enforceability of certain of these provisions remains unclear, especially clauses strictly barring any challenge upon penalty of contract termination.

Here’s a relatively recent protective provision regarding patent challenges that appears to be both compelling and enforceable.? It’s from the 2018 Scripps license to ImmunoMedics for IP related to Trodelvy, ImmunoMedics’ antibody conjugate to treat breast cancer:

Several aspects of this provision are noteworthy.? (1)? No previous payments or current obligations, including patent costs, may be recouped.? (2)? Future milestone payments and royalties owed are doubled during the pendency of the challenge and continue through the license term (from $5 million and 0.5%, respectively, in this instance).? (3)? Both parties acknowledge that the licensed patents are more valuable post-challenge, so doubling of payments is warranted.? (4)? Challenges by sublicensees are swept into the provision.? (5)? Although disputes regarding license scope might arise, claims or allegations must challenge the validity or enforceability of licensed patents to constitute a Patent Challenge.

While facts and circumstances will dictate whether an alliance partner becomes a “frenemy”, a clearly articulated protective provision is a helpful prophylactic.

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You can see the introduction to this ongoing series of articles about best practices in biopharma licensing, or go directly to links to previously posted articles of the series here.