For biotech founders, the clock starts ticking the moment your idea begins to take shape. Whether you’re pitching investors, planning your first experiments, or hiring your first employees, a thoughtful intellectual property (“IP”) strategy designed to protect your company’s foundational innovations remains a critical piece of the company’s value. Developing an IP strategy is more than just a box to check on your journey to commercialization, though, because it can impact your ability to raise capital, protect your innovation, and shape your go-to-market strategy. One of the most important and often overlooked aspects to consider in this area is how best to protect the company’s core innovations: by filing patent applications or via trade secrets[i]?
To make an informed decision on this important strategic question, you’ll first need to understand the key differences between obtaining patent protection and relying on trade secrets to protect your IP. You’ll also need to understand the timing, cost, and complexity of the patent process.
- Patents vs. Trade Secrets
The main difference between patent and trade secrets is that patents are territorial rights granted by national governments after a time-consuming, complex, and expensive application process (more about patent costs below) while trade secrets, though also territorial rights, do not require an application, only that their owner expend reasonable efforts to keep them confidential.
Patents comprise a government-granted monopoly under which a patent owner can exclude all other persons from making, using, or selling a patented invention for the duration of the twenty (20) year patent term.[ii] In exchange for these rights, patent applicants are required publicly to disclose the details of their invention in a patent application that will be published approximately eighteen (18) months after its earliest effective filing date (the so-called patent “quid pro quo”). Patents provide better protection for inventions that are easily reverse-engineered from a product. Claims of patent infringement (i.e., using a patented invention without permission) must be filed and litigated in federal district court.
In contrast, trade secrets require neither an application nor public disclosure and can last indefinitely if secrecy is maintained. Trade secret owners must take reasonable steps to maintain secrecy such as, for example, requiring anyone having access to a trade secret to sign a non-disclosure agreement and observe reasonable security protocols. Protection begins when reasonable steps are taken to maintain secrecy. Trade secrets provide better protection for inventions that are not easily discoverable and are difficult to replicate. Claims of trade secret theft or “misappropriation” can be prosecuted under state or federal law, and a successful claim typically requires proof of improper acquisition (e.g., theft, breach of contract).
- Patent Timelines
So how long does it actually take to get a patent? Patenting an invention usually takes a while. In the time between filing a priority application and patent grant, a patent application will be filed multiple times in one form or another and undergo detailed review for compliance with application formalities, followed by substantive legal examination in one or more patent offices around the world (because patent rights are territorial) over the course of several years – a process called “patent prosecution”. Understanding these timelines, the associated costs, and accompanying key decision points is essential for biotechnology executives.
The full timeline for obtaining a patent typically looks like this:
A. What is a Priority Patent Application?
Before diving into the details, I first need to explain some key terms used during patent filing and examination, beginning with the different types of patent applications available to protect new inventions.[iii] A new invention can be any new and useful process, machine, article of manufacture, or composition of matter.
You’ll encounter several different kinds of patent applications during the patent process, beginning with what’s called a “priority application”. Patent systems around the world are generally “first-to-file” systems, meaning the first person to file a patent application on a protectable invention will be awarded a patent. The first applicant to file simply needs to have a filing date that precedes the filing dates of all other applicants attempting to patent similar inventions.
The priority application thus puts a stake in the ground for the first inventor seeking to patent an invention. Subsequent applications drawn to the same technical subject matter, having common inventorship, and filed by the applicable deadline (see below) can be linked to an earlier-filed priority application by including a “priority claim” specifically referencing the earlier application. Later-filed applications containing a valid priority claim are entitled to the earlier filing date of the priority application for purposes of identifying so-called “prior art” – references filed before the priority date that can be used to reject an invention during examination.
A priority application may be a US priority patent application, a foreign patent application (e.g., a European patent application filed with the European Patent Office, a Chinese patent application filed with the State Intellectual Property Office, etc.), or an international application filed under the Patent Cooperation Treaty (a “PCT” application; more on this later).
A US priority patent application can be either a provisional patent application or a utility patent application. Provisional applications are not examined or published, and thus are not required to comply with certain formal requirements for filing non-provisional (i.e., utility) patent applications. Non-provisional or utility applications are reviewed for compliance with application formalities, published approximately eighteen (18) months after their earliest effective filing date, and assigned to a patent examiner for examination. PCT applications are reviewed for compliance with application formalities, published approximately eighteen (18) months after their earliest effective filing date, undergo an international search process before entering the national stage thirty (30) or thirty-one (31) months after their earliest effective filing date, and eventually begin examination in applicant-selected jurisdictions around the world. As we’ll discuss in more detail below, the PCT enables applicants to file a single international application that is later converted into one or more national patent applications (called “national stage applications”) in any PCT member state according to a specified timeline set out in the treaty itself.
B. Where Should I Start?
For most start-ups, the first step in obtaining a patent is usually the filing of a priority application[iv] to establish the “priority date” for the invention. For U.S.-based companies, the priority application is most often a U.S. provisional patent application. Because provisional applications are not required to comply with the same formal requirements as a utility application, some applicants take shortcuts and simply file whatever they have that describes their invention, from a conference abstract, a set of Power Point® slides or a poster from a conference presentation, to a draft journal article. For reasons discussed in more detail below, however, it is generally considered a best practice to file as complete an application as possible at the priority date; this greatly increases the likelihood that any subsequent challenge regarding whether your invention is actually entitled to its priority date will be unsuccessful.
The cost of filing a US provisional patent application includes the USPTO filing fee of $325 plus attorney fees for drafting the application, which typically range from $10,000-$15,000 on the low end to $35,000 or more on the high end, depending on the hourly rate of the patent attorney or patent agent doing the drafting, and the length and complexity of the technical subject matter.
The priority filing triggers a 12-month window (the “priority year”) to file patent applications drawn to the same invention in the US and other countries. Provided those subsequent applications are filed before expiration of the priority year and include a “priority claim”[v] specifically referencing the earlier filed application, they will be treated as if they were filed on the original priority date. This allows the later-filed applications to benefit from the earlier priority date because the priority date determines what “prior art” can be raised during examination. Losing the benefit of an earlier-filed application’s priority date opens the door to consideration of later-filed publications or inventions as prior art against the claimed invention, and that can be problematic in quickly progressing fields like biotechnology.
C. Benefits of Filing a Priority Application
Securing a priority date by filing a US provisional application effectively protects your invention from being invalidated by patent publications, scientific journal articles, or other publications made public after your priority date but before your later-filed applications undergo substantive examination. The priority year also gives the inventors additional time to further develop the invention, refine their clinical and commercial strategies, and decide where else to seek patent protection.
Further development in the priority year might include performing additional characterization of the invention or further testing of its biological activity, but should not encompass actually designing the eventual commercial embodiment because if the initial priority filing does not disclose, describe, and enable the commercial embodiment, it is unlikely that the inventors will be able to claim the benefit of their priority date. Thus, a priority filing must disclose, describe, and enable one or more novel, useful, and non-obvious inventions as of the filing date for which benefit is sought. Because each new patent application must satisfy the substantive requirements of patentability (i.e., novelty, utility, non-obviousness, written description, and enablement) patent attorneys generally advise their clients to file as complete an application as possible as of the priority date; this will give each applicant the best chance at showing their filing is entitled to its priority date.
Finally, filing a priority application allows patent applicants to delay making the more significant investment associated with filing international applications under the Patent Cooperation Treaty (PCT), entering the national or regional stage in multiple jurisdictions, or filing direct national patent applications in countries that have not signed the PCT (see below). This can have considerable value for early-stage start-ups who may not yet have raised much operating capital. It’s important to note, however, that in some circumstances a company may obtain greater benefit from delaying a first filing given the length of clinical development prior to seeking regulatory approval and the fact that drug patents typically have the greatest value towards the end of their patent term after the drugs they protect are actually being sold to physicians and patients.
If there is a compelling business need to obtain patent protection more quickly, however, there are a variety of options available to accelerate the application process. First, applicants need not wait until expiration of the full priority year to convert a priority application to a PCT application. Second, applicants need not wait to enter key jurisdictions via national stage under the PCT, they can simply file directly in any PCT member or non-member state on or before expiration of the priority year, provided the related PCT application is filed on the same day as the direct national applications. Third, many jurisdictions have procedures in place that provide for accelerated examination. In the US, for example, applicants can file a request seeking Track One prioritized examination. If granted, applications examined under Track One will receive a final disposition (allowance or final rejection) within about twelve (12) months. Fourth, and finally, applicants can skip the priority year entirely if their invention is already “ready for patenting” and requires no further development or refinement.
3. Filing PCT and/or Direct National Applications
After filing a priority application, the inventors have up to one year to prepare and file one or more follow-on non-provisional patent applications, generally either (1) an international or PCT application, (2) a US utility application, and/or (3) a direct national application in one or more countries that have not signed the PCT, any or all of which must be filed on the same day to claim benefit of the priority application.
The PCT application process provides a streamlined approach to converting a single PCT application into many individual national or regional patent applications that are examined and granted separately. The provisions of the Patent Cooperation Treaty, including the complex rules governing the filing of PCT applications, are administered by the World Intellectual Property Organization (WIPO).
Patent practitioners often call the process of preparing a PCT or direct national application from a corresponding priority document “conversion”. Provided the priority document is converted to a PCT application, a US utility application, or one or more direct national applications before expiration of the priority year, all subsequent applications remain entitled to claim the benefit of the filing date of the earlier-filed priority application. The PCT application process begins with the international phase, where a single application is filed in one of the PCT’s ten publication languages (Arabic, Chinese, English, French, German, Japanese, Korean, Portuguese, Russian, or Spanish).
The cost of filing a PCT application includes the transmittal fee of $285, the search fee of $2400 (using the USPTO as international searching authority (ISA)), the international filing fee of $1362 (for the first 30 pages of the international application), and excess page fees at a rate of $18 for each additional 30 pages, for a total of approximately $4500 for a roughly 120-page application, plus any attorney fees for revisions to the application prior to filing, which typically range from $10,000-$20,000, depending on the hourly rate of the patent attorney or patent agent doing the drafting and the amount of revisions required.
US utility applications filed on the same day as the corresponding PCT application are referred to as “bypass continuation” applications, as opposed to US utility applications filed at the 30-month national stage deadline, which are referred to simply as US national stage applications. Filing a bypass continuation can speed up the time to patent grant in the US, because they generally start examination sooner than US national stage applications. That is because all US national stage applications are handled by the international receiving office at the USPTO, a relatively small office which is generally understaffed relative to the rest of the USPTO.
There are between thirty (30) and forty (40) non-PCT countries in which the filing of a direct national application is required to obtain patent protection; the list changes regularly, and some territories have complex filing relationships. As just one example, Hong Kong is not a PCT contracting state, but patent protection in Hong Kong can be obtained by registering either a European (EP) or a Chinese (CN) patent application in the territory. The cost of these filings is similar to those of a national stage application, including translation costs, local filing and search fees, and local counsel’s fees (see below).
4. International Search, Publication, and Examination; Entering National and/or Regional Stage
After filing a PCT application, the applicant has 30- or 31-months from the application’s earliest filing date (i.e., 18- or 19-months from the PCT filing date, known as the “international filing date”) to enter the national and/or regional stage in selected countries and regions. Patent costs increase dramatically with the filing of multiple national and/or regional stage applications, because these filings must comply with various formalities and rules in each jurisdiction selected. This generally requires the hiring of local counsel and payment of their fees, translation of the application into the local language, and payment of additional national filing fees. The PCT comprises one hundred and fifty-eight (158) contracting states (see, e.g., https://www.wipo.int/en/web/pct-system/pct_contracting_states) and five (5) regional patent offices each conducting patent examination for multiple contracting states. It is difficult to give an accurate estimate of the cost to enter national stage because filing and translation costs increase with application length, but filing national stage applications in eight to twelve PCT member states (e.g., the US, Europe, China, Japan, Korea, Australia, New Zealand, Canada, Brazil, Mexico, and Russia) for a PCT application of average length (~120 pages) typically costs between $80,000-$120,000. Applicants are generally also required to pay annual fees (“annuities”) which increase year over year to maintain the application in each national or regional jurisdiction where it is filed.
Regional patent offices under the PCT function in much the same way as the PCT itself: an applicant files a single application that is examined by the regional office, and if the office grants a patent, the applicant can validate the application as a national patent in one or more of the countries in the region. The PCT has five (5) regional offices, comprising: (a) African Regional Intellectual Property Organization (ARIPO); (b) European Patent Office (EPO); (c) Eurasian Patent Organization (EAPO); (d) African Intellectual Property Organization (OAPI); and (e) Patent Office of the Cooperation Council for the Arab States of the Gulf (GCC; see, e.g., https://www.wipo.int/en/web/patents/topics/worksharing/regional-patent-offices).
Shortly after filing a PCT application, the PCT Receiving Office (RO) where it is filed will examine the filing for compliance with various formal requirements; if anything is missing or does not comply with the various rules of filing, the RO will issue an Invitation to Correct Defects setting a time period for the applicant to file corrected or compliant application papers.
At the same time, the designated International Search Authority (the patent office of one of twenty-four PCT contracting states or regions including, for example, the US, Europe, Canada, China, Japan, among others) will perform a preliminary prior art search. The results of this international search are summarized in a series of documents sent to the applicants, including an International Search Report (ISR), an International Preliminary Report on Patentability (IPRP), and a Written Opinion of the International Search Authority (WO/ISA). Applicants need not respond to any of these reports, but they often provide a useful preview of what prior art one should expect to see cited during patent prosecution. Finally, the international search portion of the PCT application process ends with publication of the application, usually with the ISA attached. PCT applications are published by WIPO on the first Thursday after the 18-month anniversary of the priority date.
Despite the fact that a PCT application is called an “international patent application,” there is no such thing as an “international patent.” WIPO itself never issues any documents that grant patent rights across multiple countries. Rather, the PCT process only simplifies the mechanism previously needed to seek patent rights in several countries simultaneously. The resulting national applications are all reviewed independently according to the substantive requirements of patentability in each jurisdiction, so although all members of a patent family share a priority date, international filing date and application number, the counterpart applications issued in different jurisdictions (e.g., the US and China) will probably look very different.
5. Examination and Patent Grant or Rejection
After filing national and/or regional stage applications, applicants will eventually wind up having one or more non-provisional applications under examination before various foreign patent offices. During examination, the applications will be reviewed for compliance with the applicable national patent laws. The results of each such review will be reported to the applicant by means of official communications called “Office Actions” or “Examination Reports”. This is where the real work of patent prosecution begins.
Patent examiners inevitably find at least one reason to reject each application at the start. Indeed, first action rejections are so common that most patent attorneys are immediately suspicious should they actually receive a “first action allowance” or an allowance without first receiving one or more rejections.
Patent prosecution is effectively a negotiation between the patent applicant and the examiner regarding the nature of the invention and the scope of protection to which it is entitled under the applicable patent law. Patent applicants generally seek the broadest possible protection for each invention, while patent examiners try their best to pare back the scope of allowed claims as much as possible. In fact, certain jurisdictions (e.g., Japan, Korea, China) nearly always limit allowed claims only to the embodiments that have actually been tested in the application itself. In that context, receiving a first action allowance likely indicates that the applicant sought too little protection.
Happily, no rejection is necessarily the end of the road. After each Office Action the applicant will have an opportunity to amend the claims and refute the examiner’s arguments. Often, the applicant will have to go through multiple rounds of examination like this, but through discussion with the examiner, you should arrive at a claim set commensurate in scope with your invention in view of the state of the art in your field. For some technologies, this process can take around eighteen months; others will require three or more years, depending on the complexity of the invention and the patent office’s queue of applications to be examined. Eventually, the examiner will either issue a notice of allowance or a final rejection. If you receive a notice of allowance and pay the issue fee by the listed deadline, after a few months of processing time you’ll finish patent prosecution with an issued patent. If you receive a final rejection, you can allow the application to become abandoned and try again with another invention or file an appeal.
6. Congratulations, You Have an Issued Patent! Now What?
After you’ve received a notice of allowance, you’ll soon receive an issue notification listing the date of patent grant, followed by an official “Letters Patent”. After the grant date, you are now the proud owner of an enforceable property right that allows you to exclude others from making, using, selling, offering to sell, and importing your invention within the issued jurisdiction. This right lasts for the duration of the patent’s term, which is twenty (20) years from its first non-provisional filing date – generally the international filing date.
In the US, patent owners must pay periodic maintenance fees due 3.5 years, 7.5 years, and 11.5 years from the grant date to keep the patent in force through the end of its term. Most other jurisdictions require the payment of similar fees, but the timing, frequency, and amount of such fees varies substantially. Failure timely to pay these annuities or maintenance fees by the deadline or before expiration of the applicable grace period (if any) will terminate your patent rights before the end of the patent term. Reinstating an issued patent after it lapses because of a missed annuity or maintenance fee payment is sometimes – but not always – possible so it is important to keep track of these deadlines.
Now you have an issued patent and have taken an important first step in developing an IP strategy to protect your company’s proprietary technology. This will be of interest to potential investors both because it protects the company’s development candidate(s) and because it supports your broader business strategy (e.g., partnering with a larger company to support future clinical development). Important next steps include: (1) ensuring that the chain of title[vi] for the issued patent and all related patent family members is complete, correct, and recorded appropriately; (2) working with your patent counsel to perform a product clearance search (e.g., a freedom-to-operate, or “FTO” search); (3) developing a longer-term filing strategy for technologies related to the technical subject matter of your first patent filing; and (4) preparing a presentation summarizing the details of the company’s IP strategy for delivery to potential investors and the Board of Directors, among others.
[i] A trade secret comprises confidential information that provides a company with a business advantage that derives its economic value primarily from the fact that is not widely known. Unlike patents, one need not apply for trade secret protection. Instead, to be considered a trade secret, information must be valuable because it is not generally known or readily accessible, and the owner must take reasonable efforts to maintain its secrecy. Reasonable efforts may include implementing security measures governing access to and use of the information, requiring employees to sign non-disclosure or confidentiality agreements before accessing the information, and the like. Exemplary trade secrets include, for example, formulas (e.g., the formula for Coca-Cola®), customer lists, manufacturing processes, algorithms (e.g., the search algorithm for Google®), and the like. We’ll discuss the pros and cons of protecting a company’s IP via trade secrets in a future blog post.
[ii] While the statutory patent term is twenty (20) years from the earliest effective filing date (excluding the priority year), the US patent term can be extended with so-called Patent Term Adjustment (day for day compensation for US Patent Office delay during examination) or Patent Term Extension (compensation for US FDA delay in reviewing applications for regulatory review). Similar mechanisms to extend patent term are also available in other jurisdictions (e.g., Supplementary Protection Certificates in Europe).
[iii] It’s also possible to protect the ornamental appearance of an article of manufacture, such as its shape, configuration, or surface ornamentation, by filing a design patent application and new plant varieties by filing an application under the US Plant Variety Protection Act. Both of those application types are beyond the scope of this blog post.
[iv] The priority application must be filed in a country that has signed the 1883 Paris Convention for the Protection of Industrial Property or that is a member of the World Trade Organization.
[v] Patent practitioners typically refer to a group of patent applications related by a priority claim(s) as a “patent family”.
[vi] The term “chain of title” refers to documentation confirming that the company owns a particular patent application and/or issued patent. The chain of title usually starts with either a license agreement or an assignment. A license is a contract where a patent owner conveys the right to make, use, and sell certain patented inventions in commercializing the technology to another entity. An assignment is a contract where one or more inventors assign their rights in an invention made as part of their job responsibilities to their employer.