Recent developments in US law have meant that investors conducting due diligence of biotech and technology companies now not only consider whether the company’s US patents are valid and cover the relevant technology but also the manner in which the claims of the patents will be enforced. In certain circumstances, the claims may be enforced by requiring a patent infringer to pay a “reasonable” royalty for continuing infringement of the patent rather than preventing the infringing activity altogether. Patents which are more likely to be enforced by preventing the infringing activity are clearly more valuable.
These developments mean that if your company is interested in maximising the value of their US patent portfolio or if you have attracted investor interest than you would be well advised to consider whether your portfolio needs to be re-structured.
Patents are an intellectual property right and it follows from that the owner of a patent can prevent others from performing the invention defined by the patent’s valid claims. This is, in effect, what provides patents with their immense commercial value. In practice, this means that there has been a strong presumption in countries with a patent system that the courts will grant an injunction to a patent holder to prevent a patent infringer from continuing their infringement.
However, in the US at least, what might be thought to be a fundamental position is subject to scrutiny.
A series of US decisions, which stemmed from efforts to mollify the impact of “non-practicing entities” on genuine commercial operators, has called into question whether a patent owners can always prevent exploitation of the invention by a third party. The decisions have established that, in certain circumstances, a patent infringer may not be required to cease their infringing activity but can instead be required to pay a “reasonable” royalty in order to continue to infringe. This is particularly the case if the infringer’s product services a different market or performs better than the patent owner’s product.
A key case is the decision of the Court of Appeals for the Federal Circuit in Bard v Gore (682 F 3d 1003 (2012)). In that decision, a patent infringer was permitted to continue infringing by sale of particular vascular grafts on the basis that they pay a reasonable royalty. The decision was based in part on the “superior features” of their vascular grafts when compared to the patent holder’s vascular grafts.
These decisions mean that patent holders can be hamstrung in their ability to deal with patent infringers and this can consequently reduce the value of patents to patent holders and to potential investors in patent holding companies.
It is therefore important to take steps to ensure that your US patent portfolio is managed in a way that improves the chances of an injunction being granted.
Managing your US patent portfolio in the light of the recent developments needs to be handled on a case-by-case basis. It depends on your company’s technology and competitive environment. However, there are certain practical tips that will apply:
- A broad valid claim may be enforceable but is more likely to be enforced by a “reasonable” royalty. Narrower claims that are directed to commercial embodiments are more likely to be enforced by an injunction. Any patent review needs to take this into consideration.
- Maintaining a “live” continuation application for important patent families gives you the flexibility to tailor the claims of that application to new infringing products and methods.
In practice, a review is most likely to be beneficial when seeking investor interest or once commercialisation of your technology is most likely to be realised.