Pharma deals 2012

Last month Pharmaceutical Executive published a summary based on its annual panel of heavy hitters in business development on best practices in licensing and M&A for the year ahead. The discussion was built around the latest findings from Cambell Alliance's 2012 Survey of Dealmaker Intentions. The survey had many interesting conclusions, and I thought that I would summarize a few of their thoughts here - I recommend reading the full article.

Most attractive in-licensing therapy areas

In-licensors expects most deals to be made in oncology, cardiovascular, CNS, metabolic and respiratory drugs. Oncology has a unique characteristic in that interest is high at all levels of the development cycle, including early stages. In fact, the interest in doing deals in pre-clinical, Phase I and II was found to be higher than for those in Phase III. All other major therapeutic segments (except immunology) showed a preference for candidates in phase III. An interesting side note from David Thomas (BIO) was that oncology, CV and CNS have the lowest success rates (less than one in 10 compounds make it from phase I to commercialization). 

Trends within individualized treatments

FDA has approved 3 drugs in the last 12 months whose mechanisms are intended for a specialized target sub-population. Because the ability now exists (in some disease areas) to target and individualize therapies for patients, the per patient costs can be higher but it is also more likely the payers will support price premiums for some guarantee of better performance among a defined patient group. J&J did a deal with the UK NICE, to obtain payer buy in, in which it guaranteed that if Velcade did not work in a patient, it'd pay back the NHS. 

About asset valuation

A decade ago the approach in valuing a target incorporated a lot of material that frankly is irrelevant, such as the number of patents on file, the number of employed scientists, or the square footage of lab space. R&D is not a numbers game. Pfizer consistently spent the most money on R&D and employed the most scientists, yet the return from its effort was poor. Nowadays companies are valued more on the basis of their strong cash flow, and little credit is given for development stage assets. The early 1990s saw enormous valuations for "ideas" with early stage IPOs, but with investors unable to sort through the good from the bad and value assets appropriately. Many companies subsequently failed.

Deal-making with academia

Universities have been empowered and push very hard on the IP front, taking a major interest in leveraging intellectual capital to generate profit. The IP and know-how from academia is important in drug development but often represents a small piece of a very complicated value equation, currently there seems to be little understanding that their contribution may only be a small part of the very long and expensive process to bring products to commercialization. Data packages from academia are rarely done to industry standards. Negotiations have on the other hand started to change. For a long time, academic partners insisted on terms that were entirely one-sided: take all the patent rights, refuse exclusivity in partnering, and reimburse them for 75 percent of the overhead costs. Today, the approach is more similar to those made with small biotech partners: with upfront payments plus royalties linked to milestones. Many TTOs now hire people with background in venture, biotech or Big Pharma - this could be a sign of an improving relationship.

Tobias Thornblad

Twitter

LinkedIn

Big Data development in Life Science

Big Data development in Life Science

Big Data is becoming an increasingly more popular concept and new companies are launched almost every week.  The first to go public - Splunk - was recently valued at $3 billion when it launched earlier this year on Nasdaq. Many players besides Splunk are approaching Big Data and some of these include Wavii, Metamarkets, Palantir and IBM. It seems like there is a race to collect, curate and analyze the vast amounts of unstructured data out there. On the non-profit side, it is reported in the latest issue of Fast Company that the Wikimedia Foundation will complete its first phase of development of Wikidata in August. Wikidata will extract data from Wikipedia to create a database focused on facts and figures with less subjectivity.

At the same time, more data is becoming available from various sources. When Facebook launched its $100-billion initial public offering, its userbase surpassed 980 million users worldwide. This means that nearly one in seven of the world’s population seems to be comfortable sharing personal data over the internet. What started out as a social network where we shared photos has transformed into a forum where we are comfortable in sharing geographical coordinates of our current locations and even position on whether we are organ donors or not. It is perhaps not far fetched to predict that we will be comfortable to share even more in the future. In spite of this trend, most of us still are more circumspect when it comes to sharing genetic, physiological and medical information online. An editorial in this month's issue of Nature Biotech brings up this issue and states that one key reason for poor uptake could be that there is still no simple and transparent way to track how personal data are being used, let alone a means to opt into, or out of, research using the data.

Portable legal consent (PLC)

To tackle this problem a new type of consent process - Portable Legal Consent (PLC) - has been launched. The PLC aims to simplify informed consent and allow feedback of results to any participants. This will put donors in greater control of their own data, which will hopefully lead to more data being shared. The feedback mechanism is thought to provide an incentive for individuals to donate data since the patients in the 'traditional model' usually learn nothing of the research outcomes from their specimens or data, which is particularly true if the results are never published. This, however, demands that informed consent is overhauled.

NBT writes that in the United States: informed consent is based on a uniform 20-year-old, almost pre-internet set of regulations, colloquially known as the ‘Common Rule’. Under the Common Rule, the patient’s signature on the consent form following an ‘informing’ conversation creates a legal agreement that allows research (or medical procedures) to go ahead. The scope of research depends on the consent form; in some cases, biological specimens and associated data can be used only in the research described in the original consent. Alternatively, consent can be broader, extending to future research, within or without some limits. Most donations of tissue and data can be used only once, in the original research project. Any subsequent analysis, reanalysis or pooling with other data is breaking the law.

The PLC (http://weconsent.us) provides a solution by permitting research participants to contribute their data to a common consented environment enabling broad and multiple research uses. Importantly, patients can withdraw their data from the database at any time. The withdrawal does not operate retrospectively, so derivatives of the data, or even copies of it held on computer drives, are likely to remain available. Publications based on their data would also be unaffected by data withdrawal.

Creating the incentives to share personal data

A crucial element, besides trust, in building a successful platform where personal data is shared is of course to provide incentives to share. Google Health failed to attract users because of many reasons but one may have been that people saw no real benefit in uploading their data. One incentive for donating data or specimens to medical research could be learning about how the data has been useful for the research community. Another may be to get access to a network of patients with the same condition (PatientsLikeMe) or learning about their genetic profile (23andMe). With the latest trends in the Quantified Self movement there will likely be multiple other incentives to share data from consumer-diagnostic tests, biometric devices to measure glucose levels, heart rate and indications of stress. The latest issue of Entrepreneur writes that Quantified Self company FitBit  says that the average user takes 43% more steps per day when they use their device. The biggest incentive, however, likely is the fact that FitBit users can track their progress online through infographics, pie charts and stated goals. For some products it may even be enough to just compile data into Facebook statuses to show friends and family how healthy you are (e.g. RunKeeper, WOD of the day, etc).

The question is not if we will share, it is when we will share our clinical data and where.

Tobias Thornblad

Twitter

IP activity in the pharma & biotech space during 2012

Much of the Life Science blogosphere has focused on the Supreme Court’s decision in Mayo v. Prometheus lately. The decision has jolted the biotech industry through a unanimous ruling that threw out two medical-testing patents and has questioned the very concept of what a law of nature is when it comes to medical testing. The case involved a group of drugs used to treat diseases such as Crohn's and ulcerative colitis. For patients taking thiopurine drugs for such immune system diseases, physicians must adjust the dose to make sure the drug works while side effects are avoided. The Prometheus patent described connecting the level of certain chemicals in the blood to the thiopurine dosage to balance between too high or too low dosage. This led justice Breyer to conclude that the Prometheus patents recited laws of nature, which has sparked a big discussion. Personalized medicine and companion diagnostics are examples of areas that are heavily affected by this and given the fact that thousands of patents for diagnostic tests have been issued in the past two decades - the court ruling could have dramatic effects on the biotech industry. One of the most cited examples is of course Myriad Genetics’ test for breast-cancer risk using information about the BRCA1 and BRCA2 genes. To follow the debate I recommend visiting Patent Baristas, Patently BIOtech or Holman’s Biotech IP Blog.

On the pharma/biotech side of the industry there is also activity in the IP-realm. Due to the commotion around Prometheus, IP analysis around pharma/bio seems to have been in the background lately. Therefore, this month, Intangitopia is providing you with an overview of IP lawsuits, settlements and infringements in the pharma/biotech space covering Jan-June 2012: 

As can be seen in the diagram above, most of the activity has been in the disease groups: 1) nervous system diseases, 2) nutritional and metabolic diseases, and 3) respiratory tract diseases. Below are summaries of the top IP news in media within these disease groups.

Nervous System Diseases

Indication	Companies	Products	Top news description
Pain	Merck & Co Inc	Vioxx	Merck Resolves Vioxx Litigation in Canada
Opioid Abuse/Pain	BioDelivery Sciences International (BDSI), Endo Pharmaceuticals	BEMA Buprenorphine	BioDelivery Sciences Receives Patent Allowance Triggering $15 Million Milestone Payment from Endo Pharmaceuticals
Pain	Zalicus Inc.	Hydromorphone hydrochloride	Settlement confirmed in litigation between Zalicus and Mallinckrodt and Watson Laboratories Inc
Parkinson's Disease	Orion Corporation	Stalevo	Orion sues Mylan to enforce its U.S. patents covering the proprietary drug Stalevo
Post-Herpetic Neuralgia	Watson Pharmaceuticals Inc, Endo Health Solutions Inc, Impax Laboratories, Inc.	Lidocaine, Lidoderm	Watson Announces Lidoderm Patent Challenge Settlement
Relapsing Remitting Multiple Sclerosis	Genmab A/S	--	Genmab Announces Patent Settlement Agreement for Ofatumumab
Sleep Disorders	Mylan Inc, Teva Pharmaceutical Industries Ltd	Modafinil, Nuvigil	Mylan Settles Provigil Litigation With Teva

Nutritional and metabolic diseases

Indication	Companies	Products	Top news description
Diabetes Mellitus	Lupin Pharmaceuticals Inc	Metformin hydrochloride	Lupin announces settlement with Santarus and Depomed for Glumetza Patent Litigation
Hypertriglyceridemia	Pronova BioPharma ASA, GlaxoSmithKline plc	Omacor	US District Court Rules in Pronova BioPharma's Favour on Lovaza Patents
Non-Insulin-Dependent Diabetes Mellitus	Novo Nordisk Inc, Sun Pharmaceutical Industries Ltd., Depomed Inc, Santarus Inc, Mylan Inc	Victoza, Glumetza, Pioglitazone hydrochloride, Metformin hydrochloride	Depomed files patent infringement lawsuit against Watson

Respiratory tract diseases

Indication	Companies	Products	Top news description
Allergic Rhinitis	Merck & Co Inc	Nasonex	U.S. District Court Rules Against Merck in Nasonex Patent Lawsuit
Asthma	Mylan Inc	Levalbuterol hydrochloride	Mylan Announces Settlement Agreement in Litigation Relating to its Generic Xopenex
Chronic Obstructive Pulmonary Disease	Mylan Inc	--	Mylan Announces Settlement Agreement in Patent Infringement Litigation Relating to Sunovion's Brovana Product
Infant Respiratory Distress Syndrome	Cornerstone Therapeutics Inc	Curosurf	Court Orders Dismissal of Curosurf Case

Tobias ThornbladTwitter

Patent wars: Stripping the iPhone bare

The BBC has done a short video about patents in ICT. Not too bad actually. 







More information can be found here.

Should secondaries be the primary comparison?

In the last couple of months there have been some marvelous IPOs and acquisitions happening in the technology space. Facebook’s likely IPO is the elephant in the room but in the meantime there have been some shockwaves with, for example; LinkedIn and Skype.

Secondaries surging !

This has lead to a surge in the secondary trade (i.e. non-public trade between shareholders) of Groupon, Zynga and Facebook equity. Directly this has lead to discussions of regulations and complaints about “opaque markets”, overvaluation etc. I was also lucky enough to attend a number of talks in London over the last weeks, with VCs discussing these and similar issues. One thing I really embraced was the notion of how scarce this type of equity is and thus might merit a higher price.

So what has this got to do with IP? Well to me the same reasoning rings very true for IP and especially investing in IP. Valuation of IP receives a lot of complaints from many people (accountants and academia to mention some) and is seen as something opaque and in need of regulation. There have been many ( more or less unsuccessful) attempts at making the market transparent (e.g. Ocean Tomo, , IP-X, IPXI, Yet2) but nothing has become a de facto standard.

IP Secondaries surging !?

Regardless of this, a large number of IP transactions take place every year (for example Apple/Freescale, Microsoft/Novell, HTC/ADC or of course the never ending Nortel)showing that even without a primary market, the secondary market will give plenty of exit opportunities. The key, however, is that the assets must be of good quality and/or strategic – just as with the equity mentioned above (or have a missed a surge in secondary trading of Lunarstorm or Friendster?)

Then there’s also a constantly growing number of venture/PE backed IP vechicles being set up (how many of you have heard of Juridica, Digitude, IPGest, ?). And of course also some very large vechicles attracting large sums of venture money like Round Rock and RPX. And if that’s not enough, you should really take a look at IV’s investors , if that’s not the cream of the crop, then I don’t know what is and somehow they were able to be convinced to invest without public prospectuses.

So I guess my point is that comparing IP with something transparent and established like the stock market with extremely liquid trading and instant pricing models might not do IP justice. But instead comparing it to the “mysterious” market of secondary investment, where exits are fewer and larger as well as investments being not for everyone but instead for the seasoned players understanding the market.

Based on this I’m actually very interested in two upcoming workshops at CIP Forum next week, where large portfolio transactions and the possibility of a European IP market will be debated. Maybe they will prove me wrong..

Marcus Malek

Follow me on twitter

Invent With Nokia?

IAM Magazine posted a question on Twitter last week in relation to the new effort by Nokia to invite independent inventors to submit their ideas for consideration, and possibly commercialization, by the Finish telecoms giant. The Invent With Nokia initiative.

The question was:
“Is Nokia's new initiative to attract innovative ideas from customers collaborative or exploitative?”

My short response to the question is that the Invent with Nokia initiative possibly is a bit of both. But that I am seeing this as an interesting step to further open up with the understanding that most of the innovation is not happening within Nokia.

Nokia already has established collaborations with universities around the world, through the Nokia Research Centers. Where a large portion is directed to forefront research in collaboration and sharing of resources with schools like Stanford, ETHZ and MIT.

By sharing resources, leveraging ideas, and tapping each other’s expertise we are able to create vibrant innovation ecosystems, multiply our efforts, enhance innovation speed and efficiency, and derive more value for our organizations and ultimately for our end-customers.

So I see the Invent With Nokia initiative as a natural way to leverage the collaborative and inventive brand even further.

Nokia explains the rational for this step:

With annual revenues of over €40bn and sales in more than 160 countries, we have an unparalleled market presence and geographic reach. In order to grow further, we need new technology, creativity and innovation.

Even though we have thousands of talented people and invest billions of dollars each year in R&D, we are eager to work with external companies who can bring diverse technology and new ideas to our business. Our successful track record of Strategic Alliances has built a strong collaborative spirit within Nokia.

Not only can we provide the infrastructure that could see your inventions in daily use around the world, you will find us straightforward and clear in your interactions with us.

There will likely be quite a lot of inventors submitting ideas to the initiative and some of them might even be really clever stuff. Much like the gains of similar initiatives, such as P&G’s Connect + Develop, the one really good idea might save the cost of the whole initiative.

However, and it is here where IAM Magazine’s question really comes to show, the financial reward for the inventor is likely to be slightly unclear.

Nokia explains

If Nokia notifies you within four months that it is interested in your invention, Nokia will have the right to apply for a patent based on your invention. In return, you will be eligible for a financial reward. Nokia’s business is very diverse, and the inventions we review are similarly broad. Whilst we take a common approach to valuing and rewarding our partners, there will be some variability. In principle you will be eligible for an award if we apply for a patent based on your invention. You may be eligible for a further award depending on the success of the product and the level of award you choose at the patent application stage.

Will this make innovators less likely to submit ideas for consideration? Probably not, but only time will tell.

Sure, innovators should be rewarded for their efforts, but would the invention have had any spread if not adopted by an industry giant. Probably not.


Johan Orneblad
Follow me on Twitter


Further reporting here

Crowdsourcing as IP-strategy

Crowdsourcing is a concept that is used ever more often when knowledge intensive industries are discussed. Arturas Vedrickas today briefly describes a location based social network known as Foursquare on the CIP FORUM blog that is planning to harness its large base of users. There are currently many interesting examples of crowdsourcing initiatives in the IT-industry where of course Wikipedia is one of my personal favorites. However, this concept is certainly spreading into other knowledge intensive industries such as the biomedical society. This is perhaps not surprising, given that the biotech revolution has transformed the whole pharma industry into a data driven reality where knowledge is key.

Crowdsourcing

Crowdsourcing refers to outsourcing tasks that would usually be performed by people within a company or institution to an outside 'crowd' of people, outside the organization. This way of harnessing the power of the many differs from other types of open innovation in that members of the crowd nowadays has grown accustomed to generally expect some kind of incentive or reward. This has been a rather quick transition given that the term 'crowdsourcing' itself was coined less than 5 years ago, by Jeff Howe writing for Wired magazine.

Harnessing the Global Brain in Life Science

Early efforts in the biomedical field to use this innovation strategy was - not surprisingly - implemented in the fields most closely similar to the IT-industry. Namely bioinformatics. Some of these efforts included BioJava, BioPerl, BioPython, Bio-SPICE and BioRuby. Two early initiatives, in 2000, without the word "bio" in their names were Screensaver Lifesaver and Folding@Home. Both of these harnessed the power of volunteers. Foldin@Home models the thermodynamics of protein folding, while the Screensaver Livesaver used 3 500 000+ volunteers to run molecular modeling simulations, docking potential ligands into the binding sites of known drug targets for various diseases.

Indianapolis based pharma giant Eli Lilly was one of the first Life Science companies to implement this way of thinking. In fact, it is more accurate to say that Eli Lilly was part of creating and defining the field of openness within Life Science. At the same time as Folding@Home and SL were launched, Sidney Junell, then head of Lilly, organized a group of executives to explore new ways of working. Impressively, no fewer than three successful open innovation companies—InnoCentive, based in Waltham, Massachusetts, YourEncore, in Indianapolis and Cincinnati, and Collaborative Drug Discovery, based in Burlingame, California—sprang from these discussions. For the past decade, Eli Lilly has maintained a leading position in the Life Science field of internet-led open innovation.

Several interesting initiatives have sprung up over the last few years in this industry. Within genomics, 23andMe (a model I have written about here on Intangitopia in the past) is a company that accumulates data from its customers through crowdsourcing. Customers of the personal genomics startup who submit samples of their saliva for genotyping have the opportunity to take part in surveys, which, when combined with their genetic information, can provide useful information to the wider group about genetic linkage. This approach of course becomes even more powerful still when genetic data are combined with contributions from patients. For Parkinson's disease 23andMe tries to achieve this through to collecting genetic data from individuals in a partnership with PatientsLikeMe and the Michael J. Fox Foundation. Patients Like Me, in turn, is also a crowdsourcing site that allows its - by now 80 000 - members to share details of symptoms and treatments with each other, as well as with the research and medical communities. The reward in this case is to learn more about one's condition through the experience of others.

Business implications and using crowdsourcing as innovation strategy

Given the intellectual property difficulties that is generated by the volunteer computing models (Folding@Home and Screensaver Livesaver), these have largely been embraced by the academic and not-for-profit sectors. But what about the other models: are these also incompatible with IP? Of course not.

A recent example of an implemented corporate model for harnessing crowd-sourcing is that of Life Technologies (LT). The company announced in December a $7 million crowdsourcing initiative called the Life Grand Challenges Contest. Focus of the contest is on LT's new Personal Genome Machine acquired from Connecticut–based startup Ion Torrent. The sequencing technology costs $50,000 to buy and can sequence a sample at a cost of $500 in just two hours. But that is apparently not good enough for Jonathan Rothberg, founder and CEO of Ion Torrent. The first three $1-million challenges in the contest ask innovators to devise ways to make Ion Torrent's technology even faster, cheaper and more accurate.

Implementing crowdsourcing in your IP-strategy

A model that I have seen successfully implemented in the IP-strategy of a large biotech company actually used crowdsourcing. This particular company often used the Innocentive platform for this very purpose. Innocentive connects a community of solvers with seekers (companies that post technically challenging research or management problems). Any individual may register as a solver. Solvers pay no fees, but most formally register for a challenge before they receive the full, confidential outline of the project. While seekers pay to register on the site and again to register each challenge. If a problem is solved, pre-defined reward(s) is/are paid to one or more solvers out of the registration fee. Intellectual property is thus protected under secrecy agreements (formal registration for solvers) and transacted to the seeker as a reward is paid to a solver.

When the company had made a new discovery it posted the problem (not its solution/discovery) on Innocentive. This way, the company was typically able to "purchase" additional solutions to the same problem by paying out Innocentive rewards. An approach that was much cheaper than inventing these solutions in-house. Patent applications covering the various solutions would then be filed and consequently a much stronger position against invent-around risks resulted.

Alternative IP-strategies and IP-based business will be discussed during CIP FORUM in May.

(Btw, don't miss the early bird fee before the end of March)

Looking forward to see you there.

Tobias Thornblad

The new wealth of nations?

Borrowing the (in my mind bold) theme from CIP Forum 2011 and tying on Johan's previous post on patent filing, I'll try to give an my angle at this.

Johan touches upon a very interesting point, not only tied to IP but I assume business in general - when (or maybe if) will Asia (China) become the new epicenter. And that's of course where CIP Forum predicts that it will be the epicenter of intangibles rather than manufacturing. These are big question, but I'm a simple economist who likes graphs - so here's my stab at it.

Quantity - YES

Johan shows one strong indication of IP becoming more important to Chinese companies and this is probably another strong sign of China trying to move away from "made in China" to "invented in China". Two Chinese tigers are ZTE, now the worlds 4th largest handset company, and of course Huawei. But besides their business success, they are also the 2nd and 4th top PCT filers.

So it's clear - Chinese have understood IP and are going after it massively. And as Johan showed, so have the Koreans, while US, EU and Japan keep a fairly steady state.

Quality - Hmm.. let's find out

So let's try and look at whether this seems to be quality. And of course this is the million dollar question.

Trying to answer the modest "wealth of nations" question, I've at least found one proxy which feels objective, namely the World Bank. Diggin through their data I've found data for royalty and license payments and receipts, on an annual country basis.

As with any model or data - it's not perfect, but let's have a look at some results. I will present payments, income and balance for US, Germany, Japan, China and Korea. This will hopefully be a decent proxy for US, EU, "Old Asia", "Booming Asia", "Next Gen Asia".

Data Analysis - Royalty and License; payments, receipts and balance, 1997 - 2009.

This first picture will show us that all countries are receiving incomes but that it's very unevenly distributed with the US as the clear leader. With a very large order of magnitude, Japan (2nd largest) still 4x smaller than USA.

The second picture tells a slightly different story, showing that all count

ries have increasing payments. Again the US have largest payments.

Two interesting aspects of this would be that a) IP is a global asset b) the trade of IP is growing.

Looking closer at Japan, Korea and China we can see that the trends look quite similar. But let's take the analysis one step further and look at them on a country by country basis.

Starting with China - the outlook is quite dismal. Although there are some receipts, the annual licensing/royalty deficit is close to 10 Billion USD.

Looking now at Korea - seen as many as the real tiger and truly booming in the business space (especially in consumer electronics and telecom) lead on by Samsung ,LG, Hynix, Hyundai. Still the annual deficit is close to 4 Billion USD. And sure, royalty incomes are increasing fast, but payments even faster as the deficit is growing year-on-year.

Now ending on a hi-note with Japan currently with a positive balance of approximately 5 Billion USD. But although looking strong now, "break even" was reached less than 10 years ago.

Trying now to tie it all together, let's look at the all countries and perhaps the most important metric of all - payment balance.

This picture really says it all in my mind. The US are just miles ahead whereas the others are struggling and actually only Japan having an annual surplus.

I'd also like to highlight 2009 as an "odd" year in the data, where many changes happened. Maybe it's a freak thing or maybe it's tied to the financial climate, who knows. But before that the analysis was simple - everyone is paying Japan and US more and more money every year.

Closing thoughts

What I wanted to show with this exercise was that although Asian countries (mainly Korea and China) are booming in terms of patent filings and general corporate growth - they are still very much trailing in terms of IP royalty payments.

It could be tempting to draw the "simple" conclusions and say that their IP is worse or likewise saying that in terms of patent holdings - they are still miles behind the likes of Sony, Panasonic, Siemens, IBM, HP etc.

And maybe the truth is somewhere in between, i.e. that what you don't have in quality you make up for in quantity. I.e. when big IBM (with tens of thousands of patents) knocked on little ZTEs door - you'd pay up, regardless of quality.

I guess what you can say is that even if Asia seems to be catching up in the administrative arena (i.e. filing patents) they still seem to be losing the battle in the business arena.

Marcus Malek

Follow me on Twitter

China on the rise

Statistics released from WIPO on 9 February shows that China is rapidly speeding up in its patenting activities. This is both encouraging and at the same time worrisome for western companies.

The total number of new PCT filings totaled at about 162,900 in 2010, which is a 5% increase from 2009. It is positive to see that what possible cutbacks the recent downturn did put on the filings might now be changing. That said, the filings originating from the US did go down ever so slightly together with United Kingdom.

On the positive side, Germany, the third largest PCT filer had an increase with just over 2%. The country also has some of the largest entities filing through the PCT system. Robert Bosch ranked 6th and Siemens 12th.

The graph shows the five countries with the highest number of PCT applications filed in 2010. The five, USA, Japan, Germany, China, Korea might not come as a surprise, and they also account for 71% of all new filings, as shown in the graph further down.

Sweden rank as number 10 on the list, but has taken a serious cutback in number of new filings with 12% down from last year. Mathias Loqvist at Awapatent says to the Swedish newspaper DN that this might be because of some companies file more qualitative patents. Sure, this could explain some of it, but I find it hard to see it account for all. He also adds the explanation that new ownership structures also could have effect on where the patent is initially filed.

Despite the relatively low filing rate for a country of China’s size it is interesting to see that they have increased their PCT filings with whopping 56% over the last year. A large part of the explanation can be attributed to the two telecoms players ZTE Corp and Huawei ranking up as the second and fourth largest filers in the world.

The future

The rise of the Asian, especially Chinese, filers is probably not a one off occurrence and I believe we will see a further rapid increase in new patent filings originating from China and Korea. The telecoms actors which have appeared on the world scene over the last years to challenge the existing dominant players have been exposed to the patent risks and will probably be even more so in the future. They are very much in the same situation as Nokia was in the mid 90’s when they really started to understand the power of patents.

To be able to be competitive and not needing to stack up a too hefty royalty on their products the new players need patents they can counter with themselves to reach cross-licenses. I do believe that we will see a totally different balance of filings in just 5 years, though they still have not yet surpassed the US economy.

Johan Orneblad
Follow me on Twitter

The role of Open Intellectual Property Platforms

Intangitopia has unfortunately remained dormant for quite a while now with all authors being busy with their jobs. This has certainly been true for myself too as I recently changed jobs to work in a startup within the medical device industry. But since I still do some research on the topic IP strategy within the Life Science industry I thought that I should write a blog post based on my latest article (co-published with Ulf Petrusson and Henrik Rosén at the Center for Intellectual Property, University of Gothenburg).

Global Technology Markets – the role of open intellectual property platforms

In the article we analyze the business phenomena where multiple stakeholders collaborate, package and transact upon technology in systems with ‘venture-market hybrid’ characteristics. We term these complex interactions, including the structures and stakeholders who build and participate in them, ‘open IP platforms’ in lack of a previous descriptive term. As many of our Intangitopia readers will recognize this concept captures much of the processes that are seen in open innovation, distributed innovation, open source, public-private partnerships and crowd-sourcing concepts. Activities on these platforms typically include collective gathering, creation and development of knowledge assets to which openness is regulated through the determined level of access, ownership and utilisation rights. We analyse how IPRs (Intellectual Property Rights) and contracts operate as a set of self-regulatory tools in the construction of platforms where technology is accessed openly but still is priced on what could be described as technology markets.

The impact of these platforms on new and developing technology intensive markets is evident and growing, though it is not yet fully clear what it is that drives the creation of such platforms, how the specific characteristics of the platforms should be understood, and what kind of markets arise as a result of these platform interactions, whether on the platform itself or in a market context where the platform participants can act as a single entity. If one wishes to understand the future of knowledge based business it will be necessary to understand and begin to answer these questions, as it is our strong belief that relating to open IP platforms, whether through participating or acting on the markets shaped by the platforms, will increasingly become a necessity. For this reason, the article presents a first attempt at answering some of these questions, by outlining the trends that have driven the emergence of the business phenomena we define as open IP platforms, and by presenting an initial concept for a framework model to understand and classify these platforms by their common characteristics.

A new collaborative logic - case study: GSM

A case study of the GSM (Global System for Mobile Communication) platform has been incorporated to illustrate a transition over time as a new logic for collaborative, market-based development coalesces. We describe a historic development that views patents as monopoly interventions in the free operation of the market. Something we argue to be a danger that need to be limited or surrendered if a common standard is to be developed. Our literature review shows a perspective on the patent as a tool through which actors can build a standard or platform for developing the standard as notably absent; at best, patents are seen as a necessary evil incentivizing innovative contribution. While it would be going much too far to say that there is not an inherent danger in the combination of strong individual IPR-based protection and the technology lock-in effects of standardization, it is our view of that it is possible and necessary to see patents as the building blocks enabling collaborative platforms such as GSM.

Framework

To further understand the underlying building blocks and enabling legal tools that provide the foundation for open IP platforms, we suggest a framework. The ambition to build platforms can only be approached by understanding the building blocks that create the platforms and design the platform characteristics. These building blocks can take the form of relationships or tacit connections, but our focus remains on the explicit legal instruments that build the platforms, and the role of IPR’s in the platform as constructive elements.

In the article we present frameworks for measuring the following parameters;

· Level of system/tool leverage

· Level of collaboration

· Level of public responsibility

· Level of platform governance

· Level of IPR claims

By applying the framework to the Innovative Medicines Initiative platform the tools that govern openness and stimulate creation of new knowledge markets are made visible based on the information in;

· IPR policies;

· Collaboration policies;

· Policies on exploitation of background and foreground;

· Membership fees and financing policies;

· Secrecy policies;

· Working guidelines and processes;

Application of the framework – Case study: Innovative Medicines Initiative

Our case study results shows that a novel creation of knowledge markets can be argued to occur whenever IP transactions – that provide access rights - take place between participants in IMI. By intellectually categorizing utilization of the generated project results in pre-competitive arenas (e.g. clinical trials and preclinical research) as IMI Research Use, an internal market is created where commercialization is not the end goal. The altruistic motives behind making tools available at little or no cost for the purpose of ensuring that pharmaceuticals are safe may be questioned by tool-supplying actors who do not normally perform clinical trials themselves. But the fact remain that an internal knowledge market with different conditions than standard commercially negotiated terms is the result. And by using the same research data with the intent to commercialize them (IMI Direct Exploitation) as therapeutic, diagnostic, screening, or recombinant tools - another knowledge market with completely different norms emerges.

The third, and arguably most radically different, ownership and access norms result when the generated results fall within the IMI Sideground definition. The outcome in this case can be interpreted as separating the generated results from the platform altogether and join the other assets of the creator’s proprietary portfolio, which have not been brought onto the platform. This means that the owner of Sideground can commercialize the results without having any access right obligations specified in the IMI IP Policy.

Since the rules and norms that govern the scope of the three knowledge markets are determined, before accession to a project, when drafting the Project Agreement – drafting this plays a major role. Successfully negotiating terms favorable to one’s self-interests is thus likely to be seen as a key activity for each participant. Developing the ability to clearly objectify and define Background, before negotiations are started, as well as implementing an intellectual asset management system to capture valuable results are consequently imperative factors to create strong market positions in these internal knowledge markets.

Conclusions

We see a development where intellectual property is increasingly used to claim early research. If we are to have platforms that increasingly make title claims on academic results, those platforms must also be capable of managing a structured contribution to the public domain to ensure that it is not impoverished by shortsighted commercial approaches. Both the ICT and Life Science markets are increasingly characterized by complex transactions of IP and cross-licensing, and we therefore need to develop and strengthen mechanisms for openness such as FRAND. This will be the only way to support proportionality and limit destructive ransoming of these platforms.

Our presented IMI and GSM examples demonstrate these issues from different perspectives. The GSM history, which by any measure is a successful collaboration, shows how a lack of structural clarity and central responsibility in open IP platforms can lead to unilateral royalty demands and the rise of complexities when trying to navigate the patent landscapes. In the case of IMI we can identify how mechanisms for sophisticated claiming of early stage research result. But also how this creates higher demands on the capabilities of universities and academic research institutions to wield these mechanisms appropriately and safeguard the public interest of independent and uninfluenced research.

Our collective abilities to develop open IP platform will in many ways define which kind of businesses that will be created and which business climate we will generate. The specifics of how to constructively develop these platforms to generate an appropriate business climate; how to safeguard public interests, build up public domain, ensure open and functioning markets, manage complex knowledge transfer and technology interdependence, etc., is a future discussion that we believe is both inevitable and vital to the construction of a functioning knowledge economy

Tobias Thornblad

(Contact via Twitter)

For the article in its entirety, please see:

Ulf Petrusson, Henrik Rosén & Tobias Thornblad: Global Technology Markets - The Role of Open Intellectual Property Platforms: Review of Market Integration August/December 2010 vol. 2 no. 2-3 333-392