Patents and Technology Transfers in a Biotechnology Context



PATENTSANDTECHNOLOGYTRANSFERSINABIOTECHNOLOGYCONTEXT

By
BobH.Sotiriadis,
SophieCoretandJacquesLemoine*

LEGERROBICRICHARD,Lawyers,
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242-Fax(514)8457874
www.robic.ca-info@robic.com

PARTONE
1.0Introduction
2.0GeneralPrinciplesWithRespecttoPatentability
2.1UnderlyingPurpose
2.2SubjectMatterofInvention
2.3MakingOne’sBed
2.4PublicDisclosureFatal
3.0WhatisanInventioninPatentTerms
3.1TheDefinitionContainedinthePatentAct
3.2Novelty
3.2.1Graceperiods(UnitedStatesandCanada)
3.2.2TheEuropeanModel,AbsoluteNovelty
3.2.3.NaturalorpreexistingBACoM:OneCannotPatentaDiscovery
3.3Utility
3.4InventiveActivity:Obviousness
3.4.1AccordingtoWhom?
3.4.2NucleotideSequences,MonoclonalAntibodiesandObviousness
3.4.3SelectionPatents
4.0TypesofClaimsThatMayBeMadeinPatentApplications
4.1Products
4.2ProcessorMethod
4.3NewUsesofKnownProducts
4.4NotableExceptionstotheRighttoPatentofBIACoM
5.0Canada:NewRules
5.1DepositofMicroorganisms
5.2DepositofAminoAcidSequencesandNucleotideListings
6.0ProvisionalPatentApplications:PatentingStrategy
7.0PatentingMedicines
7.1OriginsofMedicines
7.2BringingaMedicinetoMarket


















































©LÉGERROBICRICHARD,1996
*Lawyer,BobH.SotiriadisisaseniorpartnerinthelawfirmLEGERROBICRICHARD,g.p.andin
thepatentandtrademarkafencyfirmROBIC,g.p.;JacquesLemoineandSophieCoretare
associatesinthosefirms.Thisdocumentwaspreparedforthepurposeofalecturegivenon
1996.10.04inthecontextofBIOCONTACTQUÉBEC96,asymposiumonabiopharmaceutical
partnershipsorganizedbytheSPEQM.Publication199.



7.3DecisiontoPatentDrugs/Medicines
7.4IntermediateProducts
7.5AspectsoftheEffectofaPatentforaSecondTherapeuticUse
7.6PatentStatusofBACoMs
PARTTWO
1.0TransferringBiotechnologyandRelatedMatter
2.0ImportanceofConfirmingTransfersinWriting
3.0MorethanTwoPartiestotheAgreement
3.1InvestorsandFinancingEntities
4.0FormofProtectionoftheObjectofTransfer
4.1DoNotConcentrateOnlyonLicencesandPatentedTechnology
4.2PublicationofApplicationsbyPatentOffice:EffectonStrategy
4.3AlternativestoStandardLicences
4.4TradeSecretsandKnow-How
4.4.1Definition
4.4.2ProtectingtheSecret
5.0PracticalAspectsofTechnologyTransfer
5.1ChoiceofLicenseeorLicensor
5.2DueDiligence
5.3TimeofTransfer
5.4ConfidentialityandProperUseofMaterialsRemitted
6.DisclosureandtheAbsoluteNoveltyRule
7.IssuesinLicensingBiotechnology
7.1Introduction
7.2Definitions
7.3Ownership,RightofTransfer
7.4ExclusiveorNon-ExclusiveGrant
7.5ExtentofTransfer
7.5.1Derivatives
7.5.2ImprovementsandRightstoIncomefromSpin-Offs
7.5.3FieldofUseandTerritorialRestrictions
7.5.4Royalties

Thispaperaimsfirsttogiveanoverviewofpatentpracticeasitrelatesto
biotechnologyandpharmaceuticals.Itdoesnotaimtobeexhaustivebutto
provideageneraloutlineofpatentpracticewithaparticularemphasison
biotechnologyandrelatedfields.Suchknowledgeisimportantforitshould
benotedthatwhilescienceandtechnologyrapidlyadvancesotodothe
variousgovernmentaldirectivesandpoliciesonthesubject.Thereexistsno
wellestablishedandacceptedbodyofjurisprudencerelatingto
biotechnology.Muchlikethesubjectmatteritcovers,thejurisprudence
continuestoevolveandgrowrapidly.Secondly,anoverviewofissues
relatingtothetransferofsuchtechnologyisprovided.
PARTONE
1.0Introduction



ThecommentsthatfollowrefernotonlytoCanadianpracticebutalsoaimto
provideanoverviewofpracticethroughouttheworldand,assuch,also
includesanemphasisonAmericanandEuropeanpoliciesandpractices.
SuchanapproachisjustifiedwhenoneconsidersthatboththeU.S(USPTO)
andEuropeanPatentOffices(EPO)aregenerallythefirsttoencounterthe
particularproblemsandissuesassociatedwiththepatentabilityof
biotechnologyinventions.Giventheireconomicimportance,therelative
speedatwhichtheyprocessapplications,andtheirthoroughness,the
positionsofthesetwoparticularofficesprovideguidelinesandalsoserveto
influencethepolicyoftheOfficesofothercountriessuchasCanada.
2.0GeneralPrinciplesWithRespecttoPatentability
2.1UnderlyingPurpose
Thepurposesunderlyingpatentlegislationarebasedpartlyontheinterestof
theStatetopromotedisclosureandaccesstoinnovationsandpartlyto
promotetheinterestsofindividualsbygrantingamonopolyovertheir
inventivework.Theholderofapatentisgrantedarighttopreventothers
fromusinginacommercialmannertheinventionasdescribedinthepatent
duringitsterm.Itshould,however,benotedthatinmostcountries,including
Canada,thecommercialisationofmedicinesisnotdependentonthe
grantingofapatentbutratheruponthereceiptofaNoticeofCompliance
fromthefederalgovernment.
ForabusinessapatentisameanstoprotecttheinvestmentmadeinR&D
programs.Itisanegativerightinthatitdoesnotprovidetherighttodo
something(ex.marketapharmaceuticalproductornewweapon),insteadit
providestherighttopreventothersfrommanufacturing,sellingorusingthe
inventionprotectedbythepatent.
Theprincipalexceptiontothisrightistheexemptionthatexistsfor
experimentalpurposes.Thefactthatoneistheownerofapatentdoesnot
allowonetopreventothersfromexperimentingwiththepatentedobjector
usingitforexperimentalpurposeswithoutcommercialgain.Inessencethe
State,inexchangeforgrantingthemonopoly,obtainsdisclosureofthe
essentialelementsofaninventionsoastoallowthepublicthebenefitof
usingtheelementsofthedisclosuretofurthertheadvancementofscience
andtechnology.Thusthemannerinwhichtheinventionisdescribedand
claimedisoftheutmostimportancesincethiswilldeterminetheouter
parametersoftheprotectionsought.
Fromaproceduralviewpointapatentisdeliveredbytheappropriate
authorityofacountry,forthatcountryandusuallyforaperiodof20years



fromthedateofthefilingofthepatentapplication.Anapplicationmustbe
filedbyeithertheinventorsortheirassignees.Inthefieldofresearch,
employersaregenerallyregardedastheownersofthepatentwhenthe
employee’smainfunctionistoinvent.However,itisadvisabletoclearlystate
inacontractofemploymentthattheemployerownstheinventionsofthe
employeetoavoidanyuncertainty,sincesuchuncertaintywillharmthe
potentialoftheinvention.
IntheUnitedStates,exceptionally,eveniftheinventorshaveassignedtheir
inventiononlytheinventorsmaysignthedeclarationthataccompaniesthe
applicationforapatent.Iftheyrefusetosignthedeclarationtheapplication
maybedeemedtohavebeenabandoned.
2.2SubjectMatterofInvention
Forapatentapplicationtobegranteditisnecessarythatitssubjectmatter
be:
-aninvention
-demonstratingutility
-showingnovelty
-demonstratingsomeinventiveactivity
-andbesufficientlydescribed
Oneofthebasesfortherefusalofapatentapplicationortheinvalidationof
apatentaftergrantisaninsufficientdescription.Thedescriptionmaybe
consideredinsufficientifitdoesnotsufficientlydescribetheobjectofthe
invention,theprocessofitsmanufactureor,mostparticularlyintheU.S.,its
use.Thedescriptionmustbesufficientlyclearandprecisetoinformothers
skilledintherelevantarthowtocreateandusetheinventionwithouthaving
toresorttoexcessiveexperimentationortrialanderror,whenthepatent
expires.
2.3MakingOne’sBed
Itshouldnotbeforgottenthatonceapatentapplicationisfileditisnolonger
possibletoeithermodifyortoaddanydetailstoitsdescription.Thus,itis
necessarytotakethetimetoassemblethegreatestamountpossibleof
informationpriortofilingthepatentapplication.Theexceptionbeinginthe
UnitedStateswhereitispossibletobetterdefinetheobjectoftheprotection
soughtthroughthefilingofa“continuationinpart”.However,a
“continuationinpart”doesnotaffordtheinventortherighttoremedy
substantivedefectsintheoriginalapplication.



2.4PublicDisclosureFatal
Itshouldalsobenotedthattheapplicationshouldbefiledbeforeanypublic
disclosureoftheinventionismadesincethiswillconstituteaninsurmountable
barriertoobtainingapatentinmostoftheworld,withthenotableexceptions
beingCanadaandtheUnitedStateswhichstillprovideforatwelve(12)
month“grace”period.
3.0WhatisanInventioninPatentTerms
3.1TheDefinitionContainedinthePatentAct
TheCanadianPatentActstatesthat:
Inventionmeansanynewandusefulart,process,machine,manufacture,
compositionofmatter,oranynewandusefulimprovementinanyart,
process,machine,manufacture,compositionofmatter(Section2)
Aspatentablematerialmicrorganisms,viruses,nucleotides,proteins,etc.fall
undertheclassificationof”compositionofmatter”.Theyarealsoreferredto,
soastodistinguishthemfromchemicalproductsas,”biologicallyactive
compositionofmatter”orBACoM.
3.2Novelty
Regardlessofthenatureoftheinventionitmustbenovel.Thatis,priortothe
filingofthepatentapplication,itmustnothavebeenmadepublically
availablebyanypersonbyanymeansanywhereintheworld.Formsof
disclosureincludepublisheddocuments,publicuseoftheinvention,salesor,
asageneralrule,anycommunicationtoathirdpartythatisnotgovernedby
aconfidentialityagreement(writtenortacit).
3.2.1Graceperiods(UnitedStatesandCanada)
CanadaandtheUnitedStatesarecountriesthatgrantgraceperiodsto
inventorswhohavepubliclydisclosedtheirinventionspriortohavingfiledfor
apatent.Thegraceperiodisoneyearfromthedateofthefirstpublic
disclosure.However,apatentapplicationmadeintheUnitedStatesor
Canadaonthebasisofthisgraceperiodmaynotformthebasisofan
applicationincountrieswithanabsolutenoveltyrule.



3.2.2TheEuropeanModel,AbsoluteNovelty
InEurope,Japanandinmost,ifnotall,othercountries,thenovelty
requirementisabsolute.Iftheinventionhasbeenmadeaccessibletothe
publicpriortothedateoffilingofthepatentapplicationthennopatentmay
beobtained,evenifthedisclosurearosefromtheinventorsthemselves.One
oftheworstscenariosariseswhentheinventorshavepublisheddetailsofthe
inventioninscientificjournals.
TotheextentthatprotectionissoughtonlyinNorthAmericathegrace
periodsarehighlyadvantageous.However,theyarealsoatrapwhenone
seekstoextendtheprotectionelsewhere.
3.2.3.NaturalorpreexistingBACoM:OneCannotPatentaDiscovery
Becausetheobjectofapatentmustbe”novel”,thatistosaynotpreviously
availableordescribedpriortothefilingofthepatentapplication,itbecomes
apparentthatsubstancesalreadyexistinginanaturalstatedonotfulfillthe
criterionof”novelty”.Onecannotpatentadiscovery.However,whilethese
substances,intheirnaturalstate,maynotbepatentablepersetheycan,
undercertaincircumstances,benefitfromprotectioniftheyhavesome
distinguishingfeatures.Thus,itispossibletopatentrecombinantplasmids
containingportionsofcDNA,orsubstanceswithahighdegreeofpuritythat
havenotbeenpreviouslyachieve.Specificusesofthesenaturalsubstances
mayalsobethesubjectofapatent.
3.3Utility
Aninventionisaboveallathinghavingsomeutility.Atfirstglancethis
conditionmightappearredundantbutithaspermittedtheresolutionof
certainfundamentalproblemsassociatedwithpatentsinthefieldof
biotechnology.InawellknownAmericancasetheobjectoftheinvention
wasasequenceofnucleotidesfromthehumangenomethathadnoknown
particularutilityatthedateofthefiling.TheU.S.PatentOfficeruledthattheir
useasgeneticmarkersdidnotfulfillthecriteriaofutilityandrejectedthe
application.
ItisfrequentlynecessarytoconvinceU.S.patentexaminersoftheutilityofan
inventionbyfurnishingthemwithexhaustivetests.Inthecaseof
pharmaceuticals,examinershaveevenoccasionallydemandedtestingon
humanstoshowutility.Tocounterthiszealanddoawaywiththistesting
requirementtheU.S.PatentOfficehasproducednewguidelines.However,it



shouldbenotedthatwhilesuchtestingmightnotbeofficiallyrequiredsome
U.S.patentexaminersstillhaveaskepticalattituderelativetotheutilityof
suchapplicationsanditisbesttoprovidethemwithmorethanjust
suppositionsastotheutilityofaninvention.
ItshouldbenotedthatinEuropeashowingofutilitymustbedisclosedbutnot
necessarilyproven.Itissimplynecessarytoshowthattheobjectofthe
inventionhaseitherindustrialorquasi-industrialapplications.
3.4InventiveActivity:Obviousness
3.4.1AccordingtoWhom?
Foraninventiontobepatentableitmustshowmorethanutilityandnovelty.
Theinventionmustnotbeobviousbutmustshowevidenceofsomeinventive
activity.ThiscriteriondoesnotappearintheCanadianPatentActbuthas
beenelaboratedbyCanadiancourtswhofoundtherequirementtoexist
withintheterm”invention”itself.
Theissueastoobviousnessisdeterminedbytheuseofafictitiousperson.In
patentlawthiselusivecreatureisaperson“skilledintheart”whopossesses
thetechnicalknowledgeassociatedwitheachparticulartechnique
containedintheinvention.Thisfictitiouspersonispresumedtohaveaccess
towhateverdocumentationexistedpriortothefilingoftheapplication.This
persondetermineswhethertheinventioniseitherdescribedorsuggestedin
theartinsuchamannerthatitscreationwouldbeobvious.Absolute
predicabilityisnotnecessary,areasonableexpectationofsuccessmay
rendertheobjectoftheinventionobvious.
3.4.2NucleotideSequences,MonoclonalAntibodiesandObviousness
Thequestionofobviousnessisparticularyrelevanttocertainnucleotide
sequences.Especiallywhentheproteincodedbythisnucleotidesequency
hasbeenpreviouslyknown.Thus,whentheproteinitselfisalreadyknown,the
applicationforthenucleotidesequenceitselfisgenerallyrejectedonthe
basisofobviousness.
Inasimilarfashionthequestionofobviousnessfrequentlyarisesinthecaseof
newmonoclonalantibodieswhoseexistencemaybeempiricallypredicted
fromtheknowledgeoftheantigenicpropertiesofaknownsubstance.In
suchcasesthePatentOfficehasrejectedtheapplication.

AlsotheEuropeanPatentOfficeandtheBoardofAppealsoftheUSPatent
Office(whichconstitutesthejurisdictionofappealoftheU.S.PatentOffice)
haveshownatendencytocontesttheinventiveactivityofapplications
wheretheproductclaimedwasempiricallyknown,wheretheincentiveto
manufactureand/orisolatewasobviousorwherethetechniquewas
consideredroutine.
However,ifanucleotidesequeceoranantibodyshowsunexpected
improvedpropertiesandunforeseendifficultiesduringtheirisolationare
overcomethen,sincesuchunforeseeablecharacteristicshavearisen,this
particularsequenceorantibodymaybepatentable.
3.4.3SelectionPatents
Itmayunexpectedlybedeterminedthataparticularsubstancebelongingto
alargerfamilyofsubstancesproducessuperiorresultstothoseobtainedusing
othermembersofthegroup.Thistypeofinnovationmaybepatentableeven
thoughthegroupofsubstancesanditspropertieswerewellknowninthepast
iftheparticularlyeffectivesubstancewasnotclearlyidentified.Thisistermed
anon-obviousselection.
4.0TypesofClaimsThatMayBeMadeinPatentApplications
4.1Products
Theproductmaybeclaimedbyitsstructureor,ifthestructureisunknown,by
theprocessofitsmanufacture:(productXobtainedbyprocessY).Itshould
benotedthatacomposition,anassociationofatleasttwodifferent
components,maybepatentableevenifindividuallythecomponentsare
known.Thecriterionofnoveltyappliestotheobjectoftheinventionwhichis
acomposition.Itshouldhoweverbeemphasizedthatthecompositionshould
notbeobviousbutthatitshowanunexpectedandparticularutility.
OnemightenvisageproductXwhosechemicalformulaiswellknownand
whichisusedasaherbicide.Ifonediscoverscertainpharmaceutical
propertiesassociatedwithXthatwouldallowonetocureadiseaseor
diseasesthenonemayattempttoobtainapatentnotontheproductperse
butratheronapharmaceuticalcompositionincludingXandanacceptable
pharmaceuticalexcipient.Onemightalsoprotectone’sinnovationby
meansofotherclaims(seebelow).
4.2ProcessorMethod

Aprocessormethodisalsopatentable.Itisclaimedbydetaillingtheessential
stepstofollowinordertoobtainthedesiredresult.Itmightbeanewprocess
formanufacturingoranewuse.Americanpatentlawwasamendedin
Novemberof1995topermitclaimsforbiotechnologicalprocesseswhereat
leastoneofthestartingmaterialsorendproductsarenovelandnonobvious.
AnimportantexceptiontothisruleofpatentabilityinCanadaandinEurope
aremedicalandveterinarytreatments.Suchtreatmentsarenotpatentable
persebutincertaincasesmaybeclaimedaspharmaceuticaluses.
4.3NewUsesofKnownProducts
Newusesforaproductthatisotherwiseknownmayalsobepatentable.This
isparticularlythecasewhenaproductoritscompositesarewellknown.Such
claimsarelabelled”UseoftheproductXfordoingY..”
Aparticulartypeofuseclaimareclaimsforasecondpharmaceuticaluse.It
isnotraretodiscoveranewuseforamedicinethathasbeenusedforsome
time.Forexampleanewuseforaspirinforthetreatmentofbunions(
unexpectedandnon-foreseeableuse)mightbepatentable.Thistypeof
claim,however,offersprotectionthatmightbedifficulttobenefitfromas
infringementmightbedifficulttoprove.
4.4NotableExceptionstotheRighttoPatentofBIACoM
RelativetoBIACoMthefollowingexclusionsshouldbenoted:
InCanada,higherlifeformsincludingplantsandanimals,arenotpatentable.
Howevermicroorganismsmaybepatentediftheymeetallthepatentability
requirementsincludingutilityandreproducibility.Thisposition,derivedfrom
jurisprudence,wasreiteratedbythePatentOfficeofCanadawhich
recentlyrejectedanapplicationrelatingtothefamousHarvardtransgenic
mouse.InEurope,despitetheEuropeanPatentConventionprohibitingthe
patentingofanimalandplantvarieties,geneticallymodifiedanimalshave
beenrecognizedaspatentablebecausetheywerenotfoundtoconstitute
ananimal“variety”butmerelyanewanimal.
InCanadaandEuropemethodsdetailingamedicaltreatmentare
prohibited.IntheUnitedStates“use”relatedclaimsareforbidden.However,
intheU.S.,patentprotectionmaybeobtainedwithrespecttoclaimsasto
medicaltreatmentandclaimsrelatedtoaspecificcomposition.



5.0Canada:NewRules
AsofOctober1,1996newrulesrelativetotheapplicationofthePatentAct
willgointoeffect.Thechangesthatrelatetobiotechnologyareasfollows:
5.1DepositofMicroorganisms
ThemostimportantchangearisesfromCanadasigningtheTreatyof
Budapestandtherecognitionoftheuseofinternationaldepositoriesfor
microorganisms.Theneteffectisthatfrequentlytosatisfytherequirement
relatingtosufficiencyofdescriptionitisnecessarytodepositthe
microorganismthatoneseekstoprotect,particularlymoresowhenthe
inventionmaynotbereproducedwithoutthebenefitofsuchadeposit
becausetheinventionitselforcertainstartingmaterialsareunavailableto
thepublic.Thatwouldbethecase,forexample,fornaturallyoccurring
microorganismsclaimedintheformofapurifiedculture.
Depositsforsuchpatentsmustbemade,atthelatest,thedayoffilingofthe
patentandthedepositnumbermustbecommunicatedwithoutdelaytothe
CommissionerofPatents.Depositsmadeinconformitywiththeprescribed
normswillbekeptsecretfor18monthsandshallthenbemadeavailableto
thepublicorindependantexperts.Itisveryimportanttoconsiderthese
delayswhencontemplatingmakingsuchadepositwithaforeign
organizationsuchastheAmericanTypeCultureCollection(ATCC).
ForCanadianapplicationsfiledpriortoOctober1,1996itshouldbenoted
thattheapplicanthasoneyear,fromOctober1,1996,tofileortransfertheir
depositstoanorganizationrecognizedbytheTreatyofBudapest.
5.2DepositofAminoAcidSequencesandNucleotideListings
AnothernewrequirementcontainedinthesenewRulesprovidesforthe
depositofcomputerizedlistingswhentheinventionrelatestonucleotidesor
aminoacidssequencessaidtobenew.Thepurposeofthisrequirementisto
allowforthecomparisonbetweensequencesallegedtobenewandexisting
sequencessoastodeterminewhethertheallegednewsequencesarereally
new.
Thesedepositsmustbeeffectedusingspecialsoftware,suchasPatentIn,
whichisavailablefromtheUSPTOandtheEPO.



6.0ProvisionalPatentApplications:PatentingStrategy
ArelativelynewruleintheUnitedStatesallowsforthefilingofprovisional
applications.Theadvantageofsuchapplicationsisthattheyarenotrequired
tobeaccompaniedbyclaimsbutonlywithadescriptionofwhatis
consideredtobetheinvention.Onceaprovisionalapplicationhasbeenfiled
theinventorhasoneyeartoconverttheprovisionalapplicationintoaregular
application.
Aimedparticularlyatsmallinventorstheprovisionalapplicationisnonetheless
usefultoinventorswhoneedtoactquicklyastheirresultshavebeen
published(pressreleases,articles,conferences,etc.).Useofthisprocedureis
advisedonlyincasesofextremeurgenceandwherestrategicallyuseful.
7.0PatentingMedicines
InthefieldofpharmaceuticalproductstheStatehasprovidedcertain
supplementaryrulesrelativetobothpatentabilityandmarketing.Aswehave
seenwhileseekingtopromoteresearchanddevelopmenttheStatealso
wishestoensurethatthepublicshallbenefitfrominventionsinthisfield,that
theywillnotbetoxicandthattheywillbeavailableatanaffordableprice.
7.1OriginsofMedicines
Medicinesarechemicalproducts.Theymaybeofmineral,vegetative,or
animalorigin.Howeverthequestionremainsastowhetherproductsderived
fromhumanbeings,suchasbloodanditsderivatives,mothersmilk,organsor
portionsoforgansmaybeconsideredasmedicines.Theseproducts,once
removedfromdonors,mayoftenundergocostlyandelaborate
transformationspriortobeingadministeredtopatientstoeithertreat,mitigate
orpreventdisease.
Moreandmorefrequentlymedicinesarebeingdevelopedfrom
biotechnology.Theseproductshavethebenefitofbeingfreefrom
contamination,arelesscostly,andlesstoxictohumanbeings.Examplesof
someoftheproductsderivedfrombiotechnologyinclude:humaninsulin
usedduringthetreatmentofdiabetes,alphainterferonusedasanantiviral
andanticanceragentandhumangrowthhormoneusedtotreatdwarfism.
7.2BringingaMedicinetoMarket



Whenanewmoleculeisfoundandappearstohavetherapeuticeffectsin
laboratoryteststhesubstancemaynotimmediatelybeplaceduponthe
market.Themanufacturerisobligedtorespecttheregulatoryconditionsto
marketthenewmedicine.Thecompanymustobtainthenecessary
authorisationsandsubmittothecontroloftheDirectorGeneralofHealthand
WelfareCanada(D.G.H.W.).Theyareobligedtoprovetheeffectivenessof
thepharmaceuticalproductthroughsuccessiveclinicaltrials(phase1,
phase2,phase3).
Duringtheclinicaltrialperiodtheobjectiveofthemanufactureristoobtain
permissiontoplacetheproductonthemarket,thepermissioniscontainedin
aNoticeofConformity.ThisNoticeconfirmsthatthemedicinerespectsthe
normsprescribedbyHealthandWelfareCanadaforhumanorveterinaryuse
andthatitssaleisauthorisedfortheCanadianmarket.Theauthorisation,
whilegrantedforanindefiniteperiod,maybesuspendedorrevokedinthe
interestofprotectingpublichealth.
Itisimportanttonotethattoobtainapatentaninventorisnotobligedto
havecompletedtheclinicaltrialsrequiredbytheDGHW.Aswithother
inventionstheexamineradoptstheworkinghypothesisthattheproductwill
eventuallybeusedforitspurposesasamedicine.
Wehaveseenthatpatentsdonotprovidetherighttomakeandsellone’s
invention,onlytostopothersfromdoingso.Thismeansthattheregulatory
processisessentialtothemarketingofmanypharmaceuticalinventions.The
timedelaysareextremelylong,uptotenyears.Thesedelaysshouldbe
seriouslyconsideredwhendevisingapatentstrategyforpatentsinthisfield.
7.3DecisiontoPatentDrugs/Medicines
Pharmaceuticallaboratoriesinvolvedinresearchinvestconsiderablesumsof
moneyinhopesoffindingtheparticularmoleculethatwillensuretheir
success.
Torecoverthecostsassociatedwithresearchanddevelopmentthese
companies,whenplacingtheproductonthemarket,theymayattemptto
protecttheirinventionbyobtainingamonopolyonexploitation.Howevernot
allmedicinesdevelopedarenecessarilypatentable.Likeanyotherinvention
theymustfulfillthecriteriaofpatentabilitycontainedinthelawandinthe
jurisprudencewhichwehavealreadyreviewed.Thesamerulesapplyto
drugsandmedicinesthatresultfrombiotechnology.Certainhumanproteins
obtainedbygeneticengineering,suchashumaninsulin,erythropein,
interferonalpha-2bhavebeenpatentedandarecurrentlymarketed.



7.4IntermediateProducts
Aswehavejustseenamedicineactuallyadministeredtothepatientmay
beprotectedbyapatent.Thequestionremains,however,astowhetherthe
intermediateproductsarepatentable.Theintermediateproductsthatmight
beclaimedaretheprecursorstothefinalproduct.Theyrepresentan
indispensableandnecessarysteptowardsthefinalpreparationofdrugs.It
wouldappearthatsuchintermediateproductsmaybepatentablein
Canadainthesameapplicationasthefinalproductswherethereissufficient
structuralsimilaritywithorifitwasusedtopreparethefinalproducts.Ifithas
auseinadditiontothefinalproduct,itmaybesubjecttoanotherpatent
application.
7.5AspectsoftheEffectofaPatentforaSecondTherapeuticUse
Thegrantofapatentforasecondtherapeuticuselimitsthepatenteeto
exploitingtheparticularclaimsofthenewpatent.Thisshouldbecontrasted
withthemonopolygrantedthepatenteeforthepharmaceuticalproduct
itself.Insuchasituationthefirstpatenteeenjoysexclusivityforthefirstuseand
allsubsequentusesderivedfromthedrugbuthewillnotbeabletoexploit
thesecondusewithoutthepermissionoftheholderofthesecondpatent.
Relativetotheholderofthesecondpatent,heisobligedtoobtainthe
permissionofthefirstpatentee,ifthefirstpatentisstillvalid,tomarketthe
drugforitsnewuse.Obviouslywhenthefirstpatentexpiresthefirstinvention
maybecopiedbyanypersonincludingtheownerofthesecondpatent.
7.6PatentStatusofBACoMs
Toconludethispartweprovidethefollowingtablewhichbrieflysummarizes
thetypesofclaimsthathaveorhavenotbeenallowedinCanada,Europe
andtheU.S.withrespecttosubjectmatterrelevanttothispaper.
Table1-StatusofBACoMClaimsCanada,EuropeandtheUnitedStates

Objectof
the
inventionP
atentablesubjectmatter1
Exampleoftypicalclaims



CANA
DAE
URO
PEU
NITE
D-
STATE
S
l
ivi
ng
ma
tte
r
ge
net
ic
ally
mo
difi
e
da
ni
malN
OYES,
but
under
oppo
sitionY
ESAtransgenicnon-human
mammalallofwhose
germcellsandsomatic
cellscontaina
recombinantactivated
oncogenesequence.
micr
oorg
a
nism
cell,
etcY
ESYESYESThehybridcellline
ECACC87#050801.CA
1,337,717
ge
net
ic
ally
un
mo
di
fie
d
livi
ng
ma
tte
ra
ni
malN
ONONO_



micr
oor
gani
sm,
cell
etc.Y
ESYESYESAbiologicallypureculture
ofBacillusmegaterium
ATCCstrain55000,or
mutantsthereof,wherein
saidmutantsarecapable
ofcontrollingthesoybean
pathogenR.Solaniwithout
phytotoxiceffectonthe
soybeanplant.US
5,393,729
polypeptideYESYESYESAnisolatedpeptideof
SEQIDNo:7.
US5,519,118.
Nucleotide
sequenceY
ESYES,ex
cept
ifthe
code
d
protei
nis
know
n.Y
ESADNAreplication
sequenceadaptedto
coupletothe3endofa
DNAstrandwhereinsaid
DNAstrandwhereinsaid
DNAstrandisnotnatively
coupledtotheDNA
replicationsequence
havingaDNAsequence
selectedfromthegroup
selectingofSEQIDNo,
SEQIDNo86,SEQIDNo
87andSEQIDNo89.
US5,389,531.
CompositionYESYESYESAninsecticidal
compositioncomprising
theBacillussotiriadisum
bacteriumofclaimX,and
anagriculturallyadjuvant.



methodin
biotechnolo
gyY
ESYESYESMethodofproducinga
polypeptidehavingthe
sequenceshowninSEQID
No:6,comprisingthestep
of:
a)culturinganhostcell
whichhasbeen
transformedwiththeDNA
sequenceofclaimX
underconditionswhich
permittheexpressionof
thepolypeptide;and
b)harvestingthe
polypeptide.
USNo5,479,122.
Methodof
medicalor
veterinary
treatmentN
ONOYESAmethodforthe
treatmentofa
behaviouraldisorderwith
changeofmood
comprisingadministrating
toamammalinneed
thereofselectedfrom
dogsandcats,anactive
ingredientselectedfrom
selegiline,itsracemate,
thelaevorotatoryisomer,
mixturesthereofinany
proportions,and
pharmaceutically
acceptablesaltsthereof,
inassociationwitha
pharmaceutically
acceptablecarrier.US
No5,547,995



UseYESYES,
butin
case
of
drug
by
using
the
wordi
ng
used
below
.N
OUseofcompoundXfor
thetreatmentoftheY.

2nduseYESYESNOUseofa(known)
compoundXforthe
manufactureofa
medicationforthe(new)
therapeutictreatmentof
Y.
1.Oncetherequirementsofnovelty,non-obviousnessandutilityhavebeen
compliedwith.
PARTTWO
1.0TransferringBiotechnologyandRelatedMatter
Asweknowbiotechnologyencompassesalargeandvariousgroupof
possibleproducts.Biotechnologyhasbeenbroadlydefinedasincluding:”any
techniquethatuseslivingorganismsorpartsoforganisms”tomakeormodify
products,toimproveplantsoranimals,ortodevelopmicroorganismsfor
specificuses.Biotechnologyextendsovermostoftheareaofthelife
sciences.
Wealsoknowthatbiotechnologyandpharmaceuticalcompanies,
universitiesandresearchcentresareallinvolvedinthevariousactivities
relevanttothelifesciencesfrominitialfundamentalresearch,subsequent
developmentphasesofresearchandfinallythecreationofnewproducts
subjecttocommercialuse.
Itisimportanttokeepinmindthereforethateachstageintheprocessof
goingfromresearchtofinalproductsmaybesubjecttodifferent
considerationswhenitcomestimetodiscussthetransferoftechnologyinthis
fieldatanyparticularstageofdevelopment.



2.0ImportanceofConfirmingTransfersinWriting
Inouropinionbeingawareandunderstandingtheimportanceofprotecting
technologytransfersbycontractandhavingknowledgeoftheidealcontents
ofsuchcontractsisnotnecessarilyguaranteetheconsistentuseofsuch
agreementinthefieldofthelifesciences.Themostimportantadvice
thereforethatonemayprovideinthisrespectisthatanyentity,largeorsmall,
owningorwishingtopurchasetechnologyshouldhaveinplacealicensingor
technologytransferprogramwhichiswelldefinedunderstoodbyallworking
withinitsparameters,andappliedconsistently.
Thereisatendancyinthebiotechnologyfieldinparticulartotransfer
technologyorvitalinformationrelatingtotechnologywithoutfirstentering
intosomeoftheagreementswewilldiscusslaterinthispaper.
Thisreticenceispartlyexplainedbytheprincipleofthefreemovementand
exchangeofideascommoninthefieldofscientificresearchwhichrun
contrarytotheelementofdistrustimposedbylegaladvisors.
Weshallnotendeavourtoprovideeverysingletypeofcontractortheideal
contentssuchcontractssincetheliteratureaboundsonthissubject.Our
experienceisnottotheeffectthattheinadequaciesoftechnologytransfer
agreementsorpoorpatentingstrategyarethesolesourceofproblemsfor
thoseinvolvedinthisfield.Theworstproblemsarisewhenthepartiestoa
transferdonot,asamatterofcourseandamatterofpracticeautomatically
proceedtoawrittenexchangeonthevariouselementsofthetransfer.Such
oversightscanbecomeverycostlyandjeopardizeyearsofhardworkand
evenultimatelycostsocietytolosethebenefitsofthepracticalapplication
ofthetechnologyinvolvedoratleastslowdownsuchadvances.These
commentsareespeciallytrueinthetrans-nationalcontext.
3.0MorethanTwoPartiestotheAgreement
Itisnotuncommoninthebiotechnologyfieldthatatransferwhich
commencedbetweenonlytwopartiesevolvestoincludeseveral
participants.Thissituationcanariseinthetrans-nationalcontextaswell.
Weknowthatbiotechnologyisderivedfromresearcheffortsinuniversities,
thelifesciencesindustry(biotechnology,pharmaceutical,medical,etc.),
governmentsponsoredorprivateresearchcentresandsoon.Someofthese
partiestoresearcheffortsfindthemselvesinthepositionofhavingtolicense




outtechnologywhileothersfindthemselvesontheothersideofthe
bargainingtable.
Becauseofthisinteractionofseveralplayersatanygiventimealongthe
evolutionaryroadofaparticularproductitisimportantthatallplayersabide
bythesamesetofrules.Itisimportantthattheownerofthetechnology
retainfullcontroloverthefruitsofitslabour.Youhaveprobablyalreadybeen
advisedoftheimportanceofforeseeinginsuchtransferstheinclusionof
clausesrelatingtoalternativedisputeresolutionsystems,legalforumfor
disputes,applicablelawfordisputeresolutionclausesandsoon.
3.1InvestorsandFinancingEntities
Thesamecommentscanbemadeforentitiesthatareinthebusinessof
financingresearchefforts.Oftentheentitythatisloaningmoneytotheowner
ofatechnology,ortakingapositioninit,mustplaythesameroleasthe
technologyownerespeciallywhentheentitythatistobefinancedhaslittle
ornootherassetsofanyvalue.
4.0FormofProtectionoftheObjectofTransfer
4.1DoNotConcentrateOnlyonLicencesandPatentedTechnology
Thereareseveralwaysbywhichtechnologymaybetransferred.Wehave
seenthatbiotechnologyandpharmaceuticalinventionscanbesubjectto
patentprotection.Suchtechnologymayalsobeprotectedwithoutrecourse
topatenting.Infactthepracticeoffocusingonlyonpatentrightsina
technologytransfercontextandevaluatingonlythepatentrightsbeing
transferredshouldnotbeblindlyfollowed.Furthermorelicenceagreements
arenottheonlymannerbywhichtechnologycanbetransferred.
Confidentialinformationrelatingtoprocesses,know-howandtradesecretsall
formpartofthepatrimonyofacompanyinthesamewaythatapatented
inventiondoes.
4.2PublicationofApplicationsbyPatentOffice:EffectonStrategy
Itmustbekeptinmindthatinmostcountries,excepttheUnitedStatesforthe
timebeing,patentapplicationsaremadeavailabletothepubliceighteen
(18)monthsaftertheyarefiled.EvenaUnitedStatespatentfiledin
accordancewiththePatentCooperationTreatywillbemadepublicpriorto
grant.



ThispublicdisclosuremeansthatanyoneinterestedmayconsultthePatent
Officewhereprotectionissoughtandliterallyreviewthepatentapplication
andobtainadescriptionoftheinvention.Therearethereforesituationswhere
itisstrategicallyunnecessaryunadvisabletofileforapatent.
4.3AlternativestoStandardLicences
Inthebiotechnologyfieldtransfersareoftenmadeatapointintimewhen
patentprotectionisnotevenavailablegiventherudimentarystageofthe
researchinvolvedorthelackofapracticalapplicationforit.Inlaw,secret
undisclosedinformationwhichhasnotbecomepartofthepublicdomain
consistsofanintangibleasset.Thismeansthatthetransfercantakeplace
withoutalicenceandwithrespecttounpatentedmatter.Theseagreements
cantaketheformofconfidentialityagreements,know-howagreements,turn
keyagreementsandevenjointventureagreementsamongstothers.
Prudencedictatesthat,dependingonthetechnologyinvolvedandthe
degreetowhichithasevolved,itisalwaysadvisabletoconsiderthe
advantagesofcontractualtechnologytransferoverthatofsimplelicensing.
Thechoiceofthepropervehicleshouldbepeggedtothestateof
developmentofthetechnologyandthegoalsandstrategyoftheparties
involved.
4.4TradeSecretsandKnow-How
4.4.1Definition
Atradesecretcanbedefinedasinformation,including,butnotlimitedto,a
formula,pattern,compilation,program,method,techniqueorprocess,or
informationcontainedorembodiedinaproduct,deviceormechanism
which:
¬isormaybeusedinatradeorbusiness;
¬isnotgenerallyknowninatradeorbusiness;
¬aseconomicvaluefromnotbeinggenerallyknown;and
¬issubjectofeffortstomaintainitsrelativesecrecythatare
reasonableinthecircumstances.
Oneofthemainadvantagesofatradesecret,comparedtoapatent,is
relativelyapparentfromitsdefinition.Wherepatentlawrequiresthatthe
patenteedisclosetothepublicitsinventioninsuchawaythattheinvention
canbereproducedbyothers,aswesawinPARTONE,theveryessenceofa
tradesecretisthatitisnotdisclosedtothepublic.Atradesecretlosesallofits



valueonceitispubliclydisclosed,whereasapatentcannotbeobtained
unlessfullandadequatedisclosureismade.Tradesecretscanextendthelife
ofaneventualpatentedinvention.
4.4.2ProtectingtheSecret
Thereare,manystepswhichcanbetakenincontrollingtradesecretsto
ensureagainsttheirmisappropriationanddisclosuretothepublicbythe
membersofanorganisation,theyinclude:
¬developingsecuredareasinresearchandmanufacturing
areas;
¬onlycertainemployeesaremadeawareoftradesecretand
areboundtosecrecybyappropriateagreements;
¬allpublicationsbypersonsawareofthetradesecretare
reviewedbeforereleasetoensurethatthecompanys
proprietaryinformationisnotdisclosed;
¬alltradesecretsmustbecommittedtoprint;
¬alldocumentedtradesecretsmustbestoredinasafeplace;
¬allplantvisitsbyaoutsidersmustbedocumentedandsuch
visitsmustalwaysbeconductedunderescort;
¬alllicenseesofrelevanttechnologymustberequiredto
maintaintheconfidentialityoftradesecrets.
Tradesecretprotectionisnotlimitedtothepatentablesubjectmatterwe
havereviewedinthefirstpartofthispaper.Asaresult,suchthingsasknow-
how,compilationofinformation,andotherbusinessinformation,whichare
notprotectablebypatents,maybeprotectedasatradesecret.Atrade
secretdoesnothavetobeinventive,itissufficientthatthereisenough
originalitytodistinguishatradesecretfromeverydayknowledgeinthe
business.Therefore,thepotentialsubjectmatterofatradesecret
encompassesandexceedsthatwhichcanbethesubjectmatterofa
patent.Tradesecretsmaybeusedinrespectofbiotechnologyincases
wherepatentprotection,oranyotherformofindustrialpropertyprotection
rights,isnotavailabletoprotecttheparticularsubjectmatter.
Whenitisexpectedthatthebiotechnologylifespanwillbeequalto,or
longerthanthetimeofprotectionsecuredbyapatentandwhenthesecret
cannotbediscoveredbyreverseengineering,tradesecretprotectionwillbe
aneffectiveformofprotectionforbiotechnology.
5.0PracticalAspectsofTechnologyTransfer



5.1ChoiceofLicenseeorLicensor
Itisimportantthatthepartiestoatechnologytransfercarefullychoosetheir
co-contractingparty.Thisisespeciallytrueforalicensorwhowishestogrant
anexclusivelicencetoalicenseeforanysignificantperiodoftime.Thereare
fewworsesituationsthenbeingtiedinwithabusinesspartnerwhomaybe
abletomeettheminimumobligationsofthelicencearrangementbut
unabletomaketheagreementamutuallybeneficialendeavourforboth
parties.
5.2DueDiligence
Itisimportantthatthelicensee,priortocontracting,carryoutaduediligence
evaluationofthetechnologyofferedbythelicensor.Wedonotusetheterm
“duediligence”lightly.Everyaspectofthetechnologytobelicensedmustbe
examinedtoensureeverythingfromtheproperchainofthetitleofthe
licensorinthetechnology,therighttolicenseitself,thevalidityofthepatent
intheeventpatentedtechnologyisbeinglicensedandtheextentof
protectionaffordedbythepatentasexpressedbythespecificationandthe
claimsofthepatent,thelikelihoodthatapatentapplicationwillbegranted
andtheprotectionlikelytobegrantedbythepatentofficeintheeventthe
technologytransferconsistsofapatentapplication,andallotherfactors
importanttothepeacefulenjoymentofthelicencebythelicensee.
Thesecommentsarealsorelevanttothebehaviourofapartywhichfinances
orinvestsinthelicensor.Beforefinancingorinvestinginacompanywhich
representsthatithasatechnologytolicenseonemustcarryoutadue
diligenceverificationofthetechnologyownerscontentions.Theinvestoror
financingpartymustalsoensurethattheconditionsofthelicenceaccepted
bythelicensorareoptimalsothatthelicensorfullybenefitsfromthe
technologyitownsthusmakingitmorecapableofrepayingitscreditoror
increasingprofitsforthepartythathastakena”position”inthelicensors
business.
5.3TimeofTransfer
Thereisnosetstrategythatmaybedictatedwithrespecttotheoptimalpoint
intimewhenonemusttransferorreceivetechnology.Itisbasedonthe
particularbusinessneedsofthepartiestothecontractatanygiventime.It
mayalsodependontherelativefinancialstrengthoftheparties.Alicensor
mightlicenseearlierthanitwouldideallywishtointheeventitrequirescash
intheshorttermforfurtherdevelopmentandwishestoaccelerateitsarrival
tothemarketplace.



Thevalueofaninventionnormallyincreasesasthedevelopmentstageofthe
finalproductadvances.Thiscanmean,therefore,thatthelicensorobtains
lessforalicenceifhelicensesearly.Thiswillprovideanopportunitytoa
licenseewhomayormaynotwishtocontributetothefurtherdevelopment
process,toobtaintechnologyatalowerinitialpriceandthenretainsome
controloverthefurtherdevelopmentofthetechnologyandperhapseven
foreseeareimbursementscheduleforpartoftheadditionalinvestment.
5.4ConfidentialityandProperUseofMaterialsRemitted
Whetheroneproceedscontractuallyorthroughalicenceagreementand
whetherthetechnologyispatentedornot,itisalwaysvitalthattheparties
haveaclearunderstandingofwhatthetechnologyisthatitisbeing
transferred.Licensorshouldbeverycarefultomaintaintheconfidentialityof
theinformationandbiologicalmaterialthatwillbereleasedtoanotherparty.
Thebiologicalmaterialtobetransferredshouldbesufficientlydescribedto
ensurethatthereisaclearunderstandingbetweenthepartiesastoexactly
whatmaterialsarebeinginvestigated.Licensorshouldmakesurethatthe
confidentialityoftheinformationdisclosedwillbekeptabsolutelyconfidential
andthatthepotentiallicenseewillnotusetheinformationtransferredforits
personalprofituntilalicensingagreementisconcluded.
Anotherconsiderationistheconcernthathealthregulatorshavewithregard
toimproperuseofbiologicalmaterialsorinappropriatehandling.Itis
importanttoensurethatthegroupreceivingthebiologicalmaterialagreeto
usethematerialincompliancewithalllawsandregulationsoftheircountry.
Furthermore,thegroupreceivingthebiologicalmaterialshouldagreetosave
andholdharmlessthetransferorofthematerialintheeventofimproperuse
ofthereceivinggroup.Itisalsousuallystipulatedthattherecipientwillusethe
materialsinaccordancewithlocallawsandregulationsrelatingtosuch
materials.
6.DisclosureandtheAbsoluteNoveltyRule
Wehavealreadyseenthattheabsolutenoveltyruleregardingthepublic
disclosureofpatentsappliesinmostcountries.Insaidcountriesaninvention
cannotunderanycircumstancesbedisclosedbeforethefilingdateofthe
application.WehavealsoseenthatinCanadaandintheUnitedStatesthere
isatwelvemonthgraceperiodforsuchdisclosure.Thedisclosureofinvention
inaccordancewithasignedconfidentialityagreementisinprinciplenot
consideredtobeapublicdisclosure.Assuchthetechnologytransfer
agreementorconfidentialityagreementisnotnormallyconsideredtobea



publicdisclosure.Whereoneiscertainthatthemarketfortheinvention
exceedsCanadaandtheUnitedStatesitisrecommendedtoapplyfor
patentprotectionassoonasthereisariskofpublicdisclosureespecially
consideringthatforadisclosuretobecomeabartopatentregistrationitcan
occurinCanadaforexampleandoperateasabartofilinginanother
country..
7.IssuesinLicensingBiotechnology
7.1Introduction
Thepresentsectiondiscussesafewoftheissuesthatpotentiallicensorsand
licenseesshouldconsiderinnegotiatinganddraftingbiotechlicence
agreementssuchasdeterminingwhoownsthebiologicalmaterialslicensed,
definingtherightstobelicensed,selectinggrantclauses,thefieldofuseand
territorialrestrictions,determininglicensingfeesandroyalties,andpreparing
provisionsmaintainingconfidentiality.
7.2Definitions
Theclarityofanylicenceagreement,whetherinrespectofbiotechnologyor
not,dependsontheterminologyusedintheagreementisclearlydefined
andwhetherthedefinitionsusedhavebeenfullyconsideredandcarefully
drafted.Onemustaccuratelydefinetheproducttobeconveyed.An
accuratedefinitionshouldincludebothwhatproductisconveyedandwhat
formthatproductmaytake.Inadditiontodefiningwhatisconveyed,itis
crucialfortherightsholdertomakecleartherightsofthepartiessin
derivatives,spin-offsorimprovementsoftheinventiontransferred.Itis
recommendedthatclearandseparatedefinitionsbeusedtodistinguishthe
differentaspectsofatechnologybeinglicensedwhereadifferentroyalty
basewillexistdependinguponhowthelicencesubjectmatterisutilizedby
thelicensee.Definitionsfor”LicensedBiologicalMaterials”,”Licensedsale
lines”,”Licensedmicroorganisms”,and”Licensedproduct”canbeincludedto
distinguishdifferentaspectsofthetechnology.
Makingseparatedefinitionsisusefulwhenitcomestimetograntdifferent
rightsinrespectofdifferentaspectsofthetechnologythatistransferred.
7.3Ownership,RightofTransfer
Alicensormustensurethathistitleinatechnologyandanytangible
biologicalmaterialsinvolvedisclearandhemustensurethatthelicensee



recognizesthatthelicensorenjoyssuchtitle.Duediligenceonthepartofthe
licenseeofcoursewillensurethatthelicensorhasacleartitleintheproperty
beingtransferred.
Itoftenhappensthatthetechnologybeinglicensedwasdevelopedin
wholeorinpartbyagovernmentalagency.Restrictionsmaybeplacedona
transferofsuchtechnologyasaresultofthecontractualarrangement
betweentheagencyandthepartyofferingtotransferthetechnology.
Limitationsmayincludethedurationoflicencesthatmaybegrantedandthe
righttograntexclusivity.Assuch,thelicenseeshouldalwaysensurethatthe
licenceagreementcontainswarrantiestotheeffectthatthelicensoris
entitledtotransfertherightsofthetechnologybeinglicensedandideally
takestepsnecessarytoensurethatsuchwarrantiesrepresentationsaretrue.
7.4ExclusiveorNon-ExclusiveGrant
Thetypeofgrantwilldependprimarilyonthetypeoftechnologybeing
offered.Ifitisafundamentaldiscoveryfromwhichdevelopmentswillfollow,
(pioneertechnology),itistothebenefitofthelicensortograntthe
technologyonanon-exclusivebasis.Ontheotherhand,withan
improvementtechnology,itwilloftenbenecessarytograntanexclusive
licenceinordertoattractaworthwhilelicensee.
7.5ExtentofTransfer
7.5.1Derivatives
Giventhenatureofthetechnologytransferredinthebiotechnology,medical
orpharmaceuticalcontextsitisimportanttoforeseeinatechnologytransfer
agreementtherightsthepartieswillhaveintheeventthematerials
transferredundergorandommutationshavinganeffectonthelicencerights
transferred.Itwillbeimportantthereforetoprovidedefinitionsinsuch
agreementsastowhatisunderstoodbythetermderivativeinthiscontext.
Wetakethelibertyofproposingtwodefinitionswhichhavebeensuggested
bytheBiotechnologyCommitteeoftheLicensingExecutivesSocietyofwhich
ourfirmisamember:
“Derivative”meansprogeny,clones,sub-clonesorproductsof
parentwhereinsuchprogenyandsub-clonesincludenon-
identicalprogenyandsub-clonesofparentandsuchprogeny
includesprogenywhichwouldnothavebeenmadebutforthe
parent.



“Derivative”meansanyprogenyandanygeneticallyengineered
modificationwhereinsuchprogenyandgeneticallyengineered
modificationisbasedonandincorporatesalloftheessential
featuresoftheparent.Thegeneticmaterialissubstantially
unchanged.Thegeneticmaterialissubstantiallybasedonan
incorporatesanessentialelementoftheparentandisverifiably
distinctfromtheparent.Thestructuraland/orfunctional
characteristicsareidenticaltoorarepredictable,expected
resultofgeneticallyengineeredmodificationsoftheparent.The
geneticmaterialissubstantiallysimilartothematerialfromwhich
itisderivedinhavingasubstantialportionofthecharacteristics
oftheparentgeneticmaterial,oranygeneticallyengineered
modificationwhichissubstantiallybasedonandincorporatesan
essentialelementoftheparentwithoutasubstantialchangein
phenotypicexpression.
Fromthelicensorsstandpoint,thedefinitionofderivativeswillenablethe
licensortocoverallchangestothebiologicalmaterialwhichfunctionin
essentiallythesamewayasthematerialoriginallytransferred.Oncethe
derivativesaredefined,thepartiesmustdeterminewhowillhaverightsin
thosederivatives.
7.5.2ImprovementsandRightstoIncomefromSpin-Offs
Inadditiontonaturalchangesinthetechnologythatistransferred,changes
canoccurinatechnologyasaresultoftheeffortsofthelicenseeorevenof
thelicensor.Alicenseemayforexampledevelopanewuseforthe
technologywhichthelicensorhadneverevencontemplatedinthefirst
place.Licensorswilloftencontendthattheimprovementfallswithinthe
licenceagreementwhilethelicenseewhomayhavedevotedagreatdeal
ofmoneyofresearchthatledtotheimprovementwillarguethatthe
improvedproductsorusesforthatmatterareoutsideoftheoriginalgrantso
thatnoroyaltiesaredue.Theremayalsobeadisputeastowhetherthe
improvementsaresodetachedfromtheinitialmaterialtransferredthatone
ortheotherofthepartieshastherighttoapplyforpatentprotection.
Thissituationisavoidedbydefiningandnegotiatingtherightsto
improvementsandspin-offsinadvance.
7.5.3FieldofUseandTerritorialRestrictions



Theconsiderationindecidinguponthefieldofusedependsonwhetheror
notthetechnologytobelicensedisofapioneerorimprovementnature.
Pioneertechnologiesnormallyhaveavarietyofcommercialapplications.A
licensorwhograntsexclusivelicencesfordifferentfieldsofapplicationcan
maximizetheroyaltyreturn.Forexample,alicensorcouldgrantanexclusive
licenceofaproductinthefieldoftherapeuticuseandanotherexclusive
licenceinthefieldofdiagnostics.
Inthecaseofimprovementinventions,normallythetechnologyislicensedin
thesoleareainwhichtheimprovementisuseful.
Territorialrestrictionscanbesetuptoenhanceroyaltyreturn.Thetechnology
canbelicensedcountrybycountrytodifferentcompaniesprovidingthey
areidentifiablemarketineachcountry.Thiscanbebrokendownfurtherto
identifiableregionswithinacountry.However,ifthepotentiallicenseeis
clearlyabletoproperlyexploitthetechnologyonaninternationalbasis,
licensorcouldthengrantaworldwidelicenceintothetransferred
technology.
7.5.4Royalties
Inviewofthevariedusesofbiotechnologyandthemannerinwhichensuing
productscanbesold,itisimportanttouseingenuityindevelopingroyalty
rates.Itis,however,extremelydifficultforthepartiestodecideonwhatisfair
marketvaluetochargefortheuseofthelicensedtechnology.Royalties
neednotbeonlyformofpaymentinlicences.Otherformsofremuneration
mayincludelicensingfees,minimumannualpaymentstoreflect
performance,andsinglelump-
sumpayments.
Licensingallowstheownerofthetechnologytorecoverexpensesincurredin
developinganinvention.Thecostincurredinprotectiontheinventionby
patentscanberecoveredbylicencefeesassociatedwiththesigning-upof
eachlicensee.Initiallicencefeesareusuallynotcreditabletowardsroyalties.
TheBiotechnologyTransferCommitteeoftheLicensingExecutiveSociety
USA/Canadahaspublishedthefollowingsuggestedroyaltyratesinthefield
ofbiotechnology:
Table2-SuggestedRoyaltyRates
PRODUCTROYALTYRATE



ResearchReagents(e.g.
expressionvector,cellculture,
mediasupplements)I
ntherangeof1%to5%of
netsales
Diagnosticproducts(e.g.
monoclonalantibodies,DNA
probes)I
ntherangeof1%to5%of
netsales
Therapeuticproducts(e.g.
monoclonalantibodies,
clonedfactors)I
ntherangeof5%to10%of
netsales
VaccinesIntherangeof5%to10%of
netsales
AnimalhealthproductsIntherangeof3%to6%of
netsales
Plant/agricultureproductsIntherangeof3%to5%of
netsales
Notwithstandingtheforegoingtable,thesettingofroyaltyratesisdetermined
onacasebycasebasisandwillbeinfluencedbyvariousfactorssuchasthe
economicbenefittobederivedbythelicensee,exclusivityversusnon-
exclusivegrant,extentofthefieldofuse,extentofterritorialrestrictionandall
otherrelevantfactors.



ROBIC,ungroupedavocatsetdagentsdebrevetsetdemarquesdecommercevoué
depuis1892àlaprotectionetàlavalorisationdelapropriétéintellectuelledanstousles
domaines:brevets,dessinsindustrielsetmodèlesutilitaires;marquesdecommerce,marques
decertificationetappellationsdorigine;droitsdauteur,propriétélittéraireetartistique,droits
voisinsetdelartisteinterprète;informatique,logicielsetcircuitsintégrés;biotechnologies,
pharmaceutiquesetobtentionsvégétales;secretsdecommerce,know-howet
concurrence;licences,franchisesettransfertsdetechnologies;commerceélectronique,
distributionetdroitdesaffaires;marquage,publicitéetétiquetage;poursuite,litigeet
arbitrage;vérificationdiligenteetaudit;etce,tantauCanadaquailleursdanslemonde.La
maîtrisedesintangibles.
ROBIC,agroupoflawyersandofpatentandtrademarkagentsdedicatedsince1892tothe
protectionandthevalorizationofallfieldsofintellectualproperty:patents,industrialdesigns
andutilitypatents;trademarks,certificationmarksandindicationsoforigin;copyrightand
entertainmentlaw,artistsandperformers,neighbouringrights;computer,softwareand
integratedcircuits;biotechnologies,pharmaceuticalsandplantbreeders;tradesecrets,
know-how,competitionandanti-trust;licensing,franchisingandtechnologytransfers;e-
commerce,distributionandbusinesslaw;marketing,publicityandlabelling;prosecution
litigationandarbitration;duediligence;inCanadaandthroughouttheworld.Ideaslive
here.
COPYRIGHTER
IDEASLIVEHERE
ILATOUTDEMÊMEFALLULINVENTER!
LAMAÎTRISEDESINTANGIBLES
LEGERROBICRICHARD
NOSFENÊTRESGRANDESOUVERTESSURLEMONDEDESAFFAIRES
PATENTER
R
ROBIC
ROBIC+DROIT+AFFAIRES+SCIENCES+ARTS
ROBIC++++
ROBIC+LAW+BUSINESS+SCIENCE+ART
THETRADEMARKERGROUP
TRADEMARKER
VOSIDÉESÀLAPORTÉEDUMONDE,DESAFFAIRESÀLAGRANDEURDELAPLANÈTE
YOURBUSINESSISTHEWORLDOFIDEAS;OURBUSINESSBRINGSYOURIDEASTOTHEWORLD