John Garvey, PhD & Michel Morency01.01.06
Patent medicine. The words conjure memories of well-dressed gentlemen hawking their wares in frontier towns, one step ahead of the sheriff. These "medicine men" produced decoctions of various animal, vegetable or mineral bases, mixed liberally with alcohol, opium, cocaine, chloroform or some other soporific, which was typically decanted into small colorful bottles and offered to the unwary as a panacea for all that ails humankind. Aiding in the sales pitch, the various remedies were usually sold in conjunction with elaborate theatrical presentations, the so-called medicine shows.
With the passage of the 1906 Food and Drug Act, the government created the FDA, later expanding its powers with the 1938 Federal Food, Drug, and Cosmetic Act, "to promote honesty and fair dealing in the interest of consumers." For the first time, manufacturers of potential therapeutic preparations were required to provide scientific proof that new products were safe before they could be marketed. Likewise, the addition of poisonous substances to foods was banned, except where their inclusion was unavoidable or was required for food production. The FDA also established safe tolerance levels for these adulterants. By implementing a strict program of pre-market clearance, consumers enjoyed better protection than under the older system, which prosecuted violations only after injuries were reported. In 1962, Congress amended the Federal Food, Drug, and Cosmetic Act, in part due to the births of thousands of deformed infants whose mothers had taken the sedative drug thalidomide. The Drug Amendments of 1962 were passed unanimously by Congress and had the effect of tightening control over prescription drugs, new drugs and investigational drugs. For the first time, effectiveness was required to be established prior to marketing of the product.
Legislation tends to be stochastic in its response to social issues, and the above-described laws must be considered in the context of history. A century ago, government played a small role in the lives of citizens, and it was generally accepted that responsibility for ones' health was an individual matter. Medical techniques and even the availability of medical care was primitive by today's standards. The Great Depression changed this, as the government took a more active role in peoples' lives, employing many through myriad social programs. World War II enhanced this, increasing the demand for pure and effective pharmaceutical products, and shifting the focus of industry toward a wartime economy. The U.S. emerged very changed, with an increasing tolerance for governmental intrusion into the lives of citizens. Great technological changes resulted in better extraction and chemical synthesis techniques. As efficacy and safety demands on the medical industry increased, the pharmaceutical manufacturers became more focused on extraction of the active components of plant-based preparations and on synthetic compounds. The public quickly became attuned to whether a product had achieved FDA approval, and saw the FDA approval as a kind of certification of safety for a product. Since it was difficult to isolate the active agents in complex herbal mixtures and, likewise, since it was impossible to remove all of the unwanted agents from these mixtures, it became increasingly difficult for companies producing products consisting of complex mixtures to secure FDA approval. A now skeptical public was not inclined to embrace unapproved products. Adding to this, the Patent Laws seemed to favor those companies who could extract the active principles from these mixtures.
Today, consumers are more educated, and have begun to realize that the FDA cannot eliminate all risk in the medications it approves. Likewise, people are beginning to take more responsibility for their own health and wellbeing, and are increasingly interested in taking an active role in their healthcare. Put simply, these days people would rather take a preventative approach to healthcare rather than the symptom-treatment approach of most pharmaceuticals. The result has been an explosion in the natural products industry. Supplements, particularly vitamins, were the first to gain acceptance, in large part due to the advocacy of established scientists like Nobel Laureate Linus Pauling. Today, "nutraceuticals" abound, and some even appear to promise a litany of curative powers reminiscent of the snake oils of a century ago. While most companies in the nutraceuticals industry are desperately trying to avoid the image of the earlier medicine shows, we are still seeing more natural remedies marketed with the stamp "patent pending," apparently evoking long-dead ghosts. Why then, when the industry is finally making real progress in its efforts to destroy the old prejudices, are we seeing a new renaissance in "patented compositions?" The cynical would be partially correct when they assert that it's a marketing strategy, but the truly business savvy know what the pharmaceutical companies have long known, that patents are the key to market exclusivity, and from that, profits.
A patent can be issued by the U.S. Patent and Trademark Office for any novel and useful invention. Over the years, the definition of inventive subject matter has been hotly debated, but for about the last 50 years, the predominant criteria has been "anything under the sun made by man." The vagueness of this definition merits an example. Papaver somniferum, commonly referred to as the opium poppy, contains numerous medically important alkaloids. The exuded latex from the mature capsule is opium, which is a natural product and as such would not be considered an invention. However, from opium, chemists can extract morphine and codeine, among other substances. Pure morphine can't be found in nature, and the extraction of morphine from opium raises the morphine to the threshold level of a patentable composition, provided it met the additional criteria of novelty (which it does not, as pure morphine has been known and in use since the 1800s). Likewise, the extraction process might qualify as patentable subject matter. In fact, U.S. Patent 6,054,584 was granted in 2000 for a novel process of extracting morphine from opium. U.S. Patent 6,067,749 was also issued in 2000, and it describes a Papaver somniferum strain that produces high levels of thebaine, a precursor to codeine that is in high demand by the pharmaceutical industry.
So how does this example translate to the nutraceuticals industry? There is a common misconception in the industry that nutraceuticals, herbal supplements or dietary supplements, are not patentable because these products are derived from natural sources. Consider that formulations usually meet the criteria for inventions, in that they are non-natural combinations of individual agents. For example, a mixture of various herbs having antioxidant properties could be patentable (again, provided the combination is novel and not an obvious variation in the art). Similarly, finding a novel composition to improve the bioavailability of a known nutraceutical product or finding a novel use for a known nutraceutical product would also provide patentable subject matter. There are several different embodiments of an invention, and patent claims can be drafted to cover all aspects, the most common claims directed to the composition of matter, formulations or combinations, methods of use, process of manufacture, and even products made by specific manufacturing processes.
So what does this mean in a commercial sense? A patent is a limited grant by the government, permitting the patentee to exclude others from practicing the invention, (i.e., making, using, selling and importing it into the U.S.). A patent grant is limited in time to 20 years from the filing date of the application for a patent. In applying for a patent, the applicant must describe the invention in sufficient detail such that other individuals skilled in the relevant art would be able to practice the invention in view of the teachings provided by the patent, and in view of the general state of the art. Many people mistakenly believe that patents and trade secrets are mutually exclusive. That is not the case. Trade secrets can complement patent coverage. Companies should understand the impact of disclosing certain elements of their business to the patent process. Patents do not, or should not, comprise a company's entire IP portfolio. Patents must describe the best mode of practicing the invention known to the applicant at the time of filing. Subsequent improvements may be kept as trade secrets. Likewise, the applicant must only disclose a best mode, not all methods of practicing the invention. An example from the pharmaceutical industry will clarify this point. For many NCEs (new chemical entities), the patent discloses the preferred method of synthesis for the compound, but post-filing improvements to the synthesis need not be disclosed. In fact, most pharmaceutical companies patent bench-scale synthesis methods, and keep information relating to industrial scale-up as trade secrets. Trade secrets are valuable business assets, and provisional patent applications, which are never examined and expire one year from their filing date, can be used to memorialize and protect trade secrets. This process will be discussed in detail in part two of this article (to appear in the March issue of Nutraceuticals World). If the provisional application is converted or otherwise used to obtain an earlier filing date for the regular application, it becomes available to the public and any trade secrets in the provisional filing will be disclosed. A patent application in active prosecution will publish 18 months from the priority date, which can be measured from the filing date of the earliest patent application used in that family.
Just like trade secrets complement patents, so do trademarks. A trademark is used to build identity around a brand. The best marks are not descriptive, and use of the mark should be initiated as soon as possible to associate the trademark with the product. While patents are subject to expiration, after which the invention is dedicated to the public, trademarks may be renewed, and for a mark in continuous use, coverage is perpetual provided the mark doesn't become generic, or so common it becomes the name for the product. Again, borrowing examples from the pharmaceutical industry, drug names are actively trademarked, and the industry spends millions of dollars educating people as to particular drug brands. When these compounds come off patent coverage, the trademark preserves much of the value of the drug, even where generic competition erodes some of the market monopoly.
So when should a company consider obtaining intellectual property rights? We strongly advocate filing for patent protection before any public use of the subject matter. This is particularly important if one later wishes to obtain patent protection outside the U.S., since most countries require absolute novelty of an invention. Any use by, or disclosure to another party not covered by some type of secrecy agreement will be considered a public use, which destroys the novel aspects of the invention. In most cases, patent protection should be sought before entering into any business discussions, particularly before signing any nondisclosure or confidentiality agreements (NDA), or other types of business agreements. Most NDAs contain rigorous definitions of confidential subject matter, and most will contain a list of exceptions to what is otherwise considered confidential. One exception typically carves out any information known by the recipient before disclosure by the disclosing party. This exception is frequently qualified by adding the limitation that the recipient must provide written documentation to support their assertion that they previously possessed the information. A patent application filed prior to the effective date of the agreement would provide proof of a constructive reduction to practice of the invention.
An important legal reason to file patent applications before commencing business discussions addresses a limitation inherent in contracts. The remedy for breach of the contract (i.e., improper disclosure by the recipient) is monetary damages awarded to the injured party. Nevertheless, the result of the improper disclosure will be to destroy any novelty in the invention, and the courts cannot undo this damage. Patent rights will be affected, and the full economic impact of this loss of confidential and proprietary information may not be realized for many years-long after any damage award is paid.
By filing patent applications before commencing negotiations, a company also protects itself from theft of the invention. In the U.S., patents are granted to the first to invent the subject matter. In the event two parties claim the same invention, a complex procedure called a "patent interference" will be initiated by the Patent Office to determine which party should be awarded sole rights to the invention. An interference is an evidentiary proceeding, and the Patent Office focuses on the dates of conception and whether there has been a diligent reduction to practice of the invention. Filing a patent application is evidence of the latter. Two companies with closely aligned business goals are likely to be working in the same fields, and may discover after business negotiations have commenced that they now have access to important information. The more relevant the information is to the core programs of a company, the more temptation there will be to appropriate the information of the other company and assert it was previously known. Outside the U.S., patents are awarded to the first party to file the application. In the worst case situation, a company might appropriate the information of another, and file for patents outside of the U.S., where a confidentiality agreement may not have legal force because of jurisdictional, temporal or other issues. As a word of caution, the U.S. appears to be heading toward the "first to file" system.
Nutraceuticals are subject to a different regulatory regime than pharmaceuticals. Government regulations are rarely black and white-they are often full of complexities that create legal challenges, as well as opportunities. However, there is a concern in the nutraceuticals industry that if it does not address its credibility and its product quality and consistency issues, FDA will eventually step in and begin to impose greater oversight. Unfortunately, stricter FDA regulation maybe imminent for several reasons. First, consumers do not think natural or herbal products have side effects. The truth is, some nutraceuticals can be more potent than pharmaceuticals. Second, because they are not obtained under a prescription, contraindications with other natural products or pharmaceuticals may be harder to predict and may become an issue. Finally, the lack of product consistency from many manufacturers (in terms of quality control and standardization) may force FDA to review efficacy profiles of products. The health claims situation has also been challenging.
It is important to understand the interrelation of the patent system with DSHEA, (the Dietary Supplement Health and Education Act of 1994), which regulates the production, distribution and labeling of nutraceuticals. Although the industry wishes to avoid regulation, companies are beginning to look and act more like those in the pharmaceutical industry. It is appropriate then to draw from pharmaceutical models in terms of intellectual property and business transactions.NW
About the authors: John Garvey, PhD, and Michel Morency, PhD, are partners in the Boston, MA, office of the law firm Foley & Lardner, LLP. Both gentlemen are members of the Biotechnology and Pharmaceutical practice groups and the Nutraceuticals and Nanotechnology industry teams. Dr. Garvey can be reached at 617-342-4085 or jgarvey@foley.com, and Dr. Morency can be reached at 617-342-4080 or mmorency@foley.com.
STAY TUNED! In March, Part II of this article will discuss how intellectual property (IP) can protect your company in the global business world. The article will also discuss the strategic use of IP in business transactions.
History
With the passage of the 1906 Food and Drug Act, the government created the FDA, later expanding its powers with the 1938 Federal Food, Drug, and Cosmetic Act, "to promote honesty and fair dealing in the interest of consumers." For the first time, manufacturers of potential therapeutic preparations were required to provide scientific proof that new products were safe before they could be marketed. Likewise, the addition of poisonous substances to foods was banned, except where their inclusion was unavoidable or was required for food production. The FDA also established safe tolerance levels for these adulterants. By implementing a strict program of pre-market clearance, consumers enjoyed better protection than under the older system, which prosecuted violations only after injuries were reported. In 1962, Congress amended the Federal Food, Drug, and Cosmetic Act, in part due to the births of thousands of deformed infants whose mothers had taken the sedative drug thalidomide. The Drug Amendments of 1962 were passed unanimously by Congress and had the effect of tightening control over prescription drugs, new drugs and investigational drugs. For the first time, effectiveness was required to be established prior to marketing of the product.
Legislation tends to be stochastic in its response to social issues, and the above-described laws must be considered in the context of history. A century ago, government played a small role in the lives of citizens, and it was generally accepted that responsibility for ones' health was an individual matter. Medical techniques and even the availability of medical care was primitive by today's standards. The Great Depression changed this, as the government took a more active role in peoples' lives, employing many through myriad social programs. World War II enhanced this, increasing the demand for pure and effective pharmaceutical products, and shifting the focus of industry toward a wartime economy. The U.S. emerged very changed, with an increasing tolerance for governmental intrusion into the lives of citizens. Great technological changes resulted in better extraction and chemical synthesis techniques. As efficacy and safety demands on the medical industry increased, the pharmaceutical manufacturers became more focused on extraction of the active components of plant-based preparations and on synthetic compounds. The public quickly became attuned to whether a product had achieved FDA approval, and saw the FDA approval as a kind of certification of safety for a product. Since it was difficult to isolate the active agents in complex herbal mixtures and, likewise, since it was impossible to remove all of the unwanted agents from these mixtures, it became increasingly difficult for companies producing products consisting of complex mixtures to secure FDA approval. A now skeptical public was not inclined to embrace unapproved products. Adding to this, the Patent Laws seemed to favor those companies who could extract the active principles from these mixtures.
These Days…
Today, consumers are more educated, and have begun to realize that the FDA cannot eliminate all risk in the medications it approves. Likewise, people are beginning to take more responsibility for their own health and wellbeing, and are increasingly interested in taking an active role in their healthcare. Put simply, these days people would rather take a preventative approach to healthcare rather than the symptom-treatment approach of most pharmaceuticals. The result has been an explosion in the natural products industry. Supplements, particularly vitamins, were the first to gain acceptance, in large part due to the advocacy of established scientists like Nobel Laureate Linus Pauling. Today, "nutraceuticals" abound, and some even appear to promise a litany of curative powers reminiscent of the snake oils of a century ago. While most companies in the nutraceuticals industry are desperately trying to avoid the image of the earlier medicine shows, we are still seeing more natural remedies marketed with the stamp "patent pending," apparently evoking long-dead ghosts. Why then, when the industry is finally making real progress in its efforts to destroy the old prejudices, are we seeing a new renaissance in "patented compositions?" The cynical would be partially correct when they assert that it's a marketing strategy, but the truly business savvy know what the pharmaceutical companies have long known, that patents are the key to market exclusivity, and from that, profits.
A patent can be issued by the U.S. Patent and Trademark Office for any novel and useful invention. Over the years, the definition of inventive subject matter has been hotly debated, but for about the last 50 years, the predominant criteria has been "anything under the sun made by man." The vagueness of this definition merits an example. Papaver somniferum, commonly referred to as the opium poppy, contains numerous medically important alkaloids. The exuded latex from the mature capsule is opium, which is a natural product and as such would not be considered an invention. However, from opium, chemists can extract morphine and codeine, among other substances. Pure morphine can't be found in nature, and the extraction of morphine from opium raises the morphine to the threshold level of a patentable composition, provided it met the additional criteria of novelty (which it does not, as pure morphine has been known and in use since the 1800s). Likewise, the extraction process might qualify as patentable subject matter. In fact, U.S. Patent 6,054,584 was granted in 2000 for a novel process of extracting morphine from opium. U.S. Patent 6,067,749 was also issued in 2000, and it describes a Papaver somniferum strain that produces high levels of thebaine, a precursor to codeine that is in high demand by the pharmaceutical industry.
So how does this example translate to the nutraceuticals industry? There is a common misconception in the industry that nutraceuticals, herbal supplements or dietary supplements, are not patentable because these products are derived from natural sources. Consider that formulations usually meet the criteria for inventions, in that they are non-natural combinations of individual agents. For example, a mixture of various herbs having antioxidant properties could be patentable (again, provided the combination is novel and not an obvious variation in the art). Similarly, finding a novel composition to improve the bioavailability of a known nutraceutical product or finding a novel use for a known nutraceutical product would also provide patentable subject matter. There are several different embodiments of an invention, and patent claims can be drafted to cover all aspects, the most common claims directed to the composition of matter, formulations or combinations, methods of use, process of manufacture, and even products made by specific manufacturing processes.
Patents, Trade Secrets and Trademarks
So what does this mean in a commercial sense? A patent is a limited grant by the government, permitting the patentee to exclude others from practicing the invention, (i.e., making, using, selling and importing it into the U.S.). A patent grant is limited in time to 20 years from the filing date of the application for a patent. In applying for a patent, the applicant must describe the invention in sufficient detail such that other individuals skilled in the relevant art would be able to practice the invention in view of the teachings provided by the patent, and in view of the general state of the art. Many people mistakenly believe that patents and trade secrets are mutually exclusive. That is not the case. Trade secrets can complement patent coverage. Companies should understand the impact of disclosing certain elements of their business to the patent process. Patents do not, or should not, comprise a company's entire IP portfolio. Patents must describe the best mode of practicing the invention known to the applicant at the time of filing. Subsequent improvements may be kept as trade secrets. Likewise, the applicant must only disclose a best mode, not all methods of practicing the invention. An example from the pharmaceutical industry will clarify this point. For many NCEs (new chemical entities), the patent discloses the preferred method of synthesis for the compound, but post-filing improvements to the synthesis need not be disclosed. In fact, most pharmaceutical companies patent bench-scale synthesis methods, and keep information relating to industrial scale-up as trade secrets. Trade secrets are valuable business assets, and provisional patent applications, which are never examined and expire one year from their filing date, can be used to memorialize and protect trade secrets. This process will be discussed in detail in part two of this article (to appear in the March issue of Nutraceuticals World). If the provisional application is converted or otherwise used to obtain an earlier filing date for the regular application, it becomes available to the public and any trade secrets in the provisional filing will be disclosed. A patent application in active prosecution will publish 18 months from the priority date, which can be measured from the filing date of the earliest patent application used in that family.
Just like trade secrets complement patents, so do trademarks. A trademark is used to build identity around a brand. The best marks are not descriptive, and use of the mark should be initiated as soon as possible to associate the trademark with the product. While patents are subject to expiration, after which the invention is dedicated to the public, trademarks may be renewed, and for a mark in continuous use, coverage is perpetual provided the mark doesn't become generic, or so common it becomes the name for the product. Again, borrowing examples from the pharmaceutical industry, drug names are actively trademarked, and the industry spends millions of dollars educating people as to particular drug brands. When these compounds come off patent coverage, the trademark preserves much of the value of the drug, even where generic competition erodes some of the market monopoly.
Obtaining Intellectual Property Rights
So when should a company consider obtaining intellectual property rights? We strongly advocate filing for patent protection before any public use of the subject matter. This is particularly important if one later wishes to obtain patent protection outside the U.S., since most countries require absolute novelty of an invention. Any use by, or disclosure to another party not covered by some type of secrecy agreement will be considered a public use, which destroys the novel aspects of the invention. In most cases, patent protection should be sought before entering into any business discussions, particularly before signing any nondisclosure or confidentiality agreements (NDA), or other types of business agreements. Most NDAs contain rigorous definitions of confidential subject matter, and most will contain a list of exceptions to what is otherwise considered confidential. One exception typically carves out any information known by the recipient before disclosure by the disclosing party. This exception is frequently qualified by adding the limitation that the recipient must provide written documentation to support their assertion that they previously possessed the information. A patent application filed prior to the effective date of the agreement would provide proof of a constructive reduction to practice of the invention.
An important legal reason to file patent applications before commencing business discussions addresses a limitation inherent in contracts. The remedy for breach of the contract (i.e., improper disclosure by the recipient) is monetary damages awarded to the injured party. Nevertheless, the result of the improper disclosure will be to destroy any novelty in the invention, and the courts cannot undo this damage. Patent rights will be affected, and the full economic impact of this loss of confidential and proprietary information may not be realized for many years-long after any damage award is paid.
By filing patent applications before commencing negotiations, a company also protects itself from theft of the invention. In the U.S., patents are granted to the first to invent the subject matter. In the event two parties claim the same invention, a complex procedure called a "patent interference" will be initiated by the Patent Office to determine which party should be awarded sole rights to the invention. An interference is an evidentiary proceeding, and the Patent Office focuses on the dates of conception and whether there has been a diligent reduction to practice of the invention. Filing a patent application is evidence of the latter. Two companies with closely aligned business goals are likely to be working in the same fields, and may discover after business negotiations have commenced that they now have access to important information. The more relevant the information is to the core programs of a company, the more temptation there will be to appropriate the information of the other company and assert it was previously known. Outside the U.S., patents are awarded to the first party to file the application. In the worst case situation, a company might appropriate the information of another, and file for patents outside of the U.S., where a confidentiality agreement may not have legal force because of jurisdictional, temporal or other issues. As a word of caution, the U.S. appears to be heading toward the "first to file" system.
Nutraceuticals are subject to a different regulatory regime than pharmaceuticals. Government regulations are rarely black and white-they are often full of complexities that create legal challenges, as well as opportunities. However, there is a concern in the nutraceuticals industry that if it does not address its credibility and its product quality and consistency issues, FDA will eventually step in and begin to impose greater oversight. Unfortunately, stricter FDA regulation maybe imminent for several reasons. First, consumers do not think natural or herbal products have side effects. The truth is, some nutraceuticals can be more potent than pharmaceuticals. Second, because they are not obtained under a prescription, contraindications with other natural products or pharmaceuticals may be harder to predict and may become an issue. Finally, the lack of product consistency from many manufacturers (in terms of quality control and standardization) may force FDA to review efficacy profiles of products. The health claims situation has also been challenging.
It is important to understand the interrelation of the patent system with DSHEA, (the Dietary Supplement Health and Education Act of 1994), which regulates the production, distribution and labeling of nutraceuticals. Although the industry wishes to avoid regulation, companies are beginning to look and act more like those in the pharmaceutical industry. It is appropriate then to draw from pharmaceutical models in terms of intellectual property and business transactions.NW
About the authors: John Garvey, PhD, and Michel Morency, PhD, are partners in the Boston, MA, office of the law firm Foley & Lardner, LLP. Both gentlemen are members of the Biotechnology and Pharmaceutical practice groups and the Nutraceuticals and Nanotechnology industry teams. Dr. Garvey can be reached at 617-342-4085 or jgarvey@foley.com, and Dr. Morency can be reached at 617-342-4080 or mmorency@foley.com.
STAY TUNED! In March, Part II of this article will discuss how intellectual property (IP) can protect your company in the global business world. The article will also discuss the strategic use of IP in business transactions.
