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    Features

    Drug Delivery Collaborations

    Ensuring collaborations enhance rather than stifle development of new technology

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    Craig Thomson, Murgitroyd & Company05.30.12
    In the drive to identify new therapeutic technologies, the pharma industry is increasingly looking to form strategic collaborations with other members of the industry, or members of other industries. Such collaborations enable the creative energy and technical insight from one party to be mixed with that of another, in the hope of developing technology that could not have been developed if the two parties had worked alone (so-called “open innovation”). For a successful outcome, it is important that both parties have a clear understanding of how they are to exploit the new technologies and what each party is to gain from the collaboration. Identifying ownership of the technology that is used and developed in the collaboration — and protecting such technology using the appropriate national and international intellectual property rights — is an important first step. If the ownership of such technology is not clearly understood, it is easy for disputes between the parties to arise.

    When initiating collaboration, both parties should be enthusiastic about the future of the collaboration. However, it is important that a simplistic view is not taken of any potential issues that may put the parties into dispute. By way of illustration, we will look at three case studies.

    Case study 1 – What could be simpler than collaboration between an innovator and a contract manufacturer? A drug delivery company specializing in inhaler devices has developed and patented a new inhaler device. The drug delivery company is not able to manufacture active pharmaceutical ingredient (API). Consequently, a contract manufacturer (CMO) is instructed to prepare the required powdered API and to fill new inhaler devices provided by the drug delivery company with the powder.

    It would appear that the drug delivery company is bringing the only innovative product to the collaboration (i.e. the patented inhaler device); the CMO is merely working under instruction. Do we have to look further than simply concluding that the collaboration requires the CMO to get paid a pre-agreed amount for their services, and the drug delivery company retains all profits from the sale of the filled inhalers?

    Case study 2 – In this case study, we look at more evenly matched parties to a collaboration. Company A develops a patented photo-activated molecular cage. Company B develops a patented cytotoxic therapeutic agent for killing cancer cells. By caging company B’s cytotoxic therapeutic agent in the molecular cage of company A, a combined product is created that enables the intravenous administration of a product that is not harmful to the cells of the body until the combined product passes through a tumor cell, where light focused by a clinician on the tumour cells break the molecular cage, thereby releasing the cytotoxic therapeutic agent.

    Case study 3 – A pharma company manufactures patented steroids, principally for treating inflammatory bowel disease. Market research has revealed that a transdermal patch for administering the steroids would be well received by the public, but the pharma company has no experience with transdermal patch technologies. Consequently, the pharma company joins forces with a company well known for developing innovative transdermal patches.

    For case studies 2 and 3, it would appear that all parties to the collaboration bring innovative technology with them. Do we have to look any further than to simply conclude that the parties should divide between them the cost of the development and the profits from the collaboration?

    If such simplistic views are taken, without any appreciation of the potential twists and turns in the development process, the collaboration may be poorly prepared for handling any difficulties that may arise. We will now look at each of the case studies in more detail, particularly to examine potential developments as the collaborations grow and how these may impact on the success of the collaborations.

    Case study 1 – The CMO successfully made powdered API, but identified a problem when loading the powdered API into the inhaler devices. It was found that the powdered API repeatedly clogged the nozzle of the filling machine, making it difficult to easily fill the inhaler devices. The CMO suspected that this would cause further difficulties, in that the API is likely to also clog the exit port of the inhaler devices. As part of an unrelated in-house project, the CMO has developed innovative inert carrier particles that improve the flow properties of powdered API. Combining the API with the innovative carrier particle appears to be the only way of solving the issue of clogging.

    Clearly, the CMO is now doing more than it was originally instructed. It would appear that its input is essential to the completion of a marketable product. Of concern to the drug delivery company would be the suggestion that its product is worthless without using the technology provided by the CMO. Of concern to the CMO is that it gets adequately compensated for the use of its inert carrier particle. Is the CMO capable of clearly demonstrating that it owns the carrier particles, and did not arrive out of joint discussions relating to the issue of clogging during the collaboration?

    Case study 2 – Company A (photo-activated molecular cage developer) and company B (cytotoxic therapeutic agent developer) worked together testing and refining the combined product for many months. Some months into this collaboration, company A is approached by company C, which has developed a further cytotoxic therapeutic agent. Company C demonstrates that its cytotoxic therapeutic agent is far superior to that of company B. Company A therefore decides to terminate the collaboration with company B and begins collaboration with company C.

    Company A may have lost some time and investment in the initial collaboration with company B, but company B is the main loser as, without a vehicle for safe administration of the cytotoxic therapeutic agent, its drug is not marketable.

    Case study 3 – The transdermal patch company has begun the process of characterizing drug release profiles for the pharma company’s steroids when loaded into its patches. The transdermal patch company identifies that its buccal patch system provides no systemic release, meaning the combined product is useless for treating inflammatory bowel disease (i.e. the intended purpose of the combined product). Further analysis shows that there is controlled local release of the steroid. The transdermal patch company realizes that the release profile is particularly suitable for treating gingivitis of the buccal mucosa.

    The work carried out by the transdermal patch company has identified an entirely new product for a new market than the one intended. Who owns this new development and who will benefit from profits from the sales to the new market?

    For each of the case studies above, it is easy to imagine how the relationships within the collaboration could become soured and the collaboration ultimately fails if the events discussed above are not resolved to the mutual benefit of the parties. Experience has shown that preparation before the collaboration begins can help to make such eventualities easier to handle, should they arise. This may sound like an obvious comment, but during the enthusiasm of the first stages of the developing collaboration it is easy to overlook some basic preparations.

    One of the most likely issues to cause problems in collaborations relate to ownership of technology, and the rewards that stem from such ownership. Ownership is an area that should be carefully considered during the preparation of any collaboration. The appropriate preparation should involve: a) identifying what technology you own and bring to the collaboration and how this is protected by IP, b) identifying what technology your collaborator owns and brings to the collaboration, and c) agreeing how to handle new technology developments created during the collaboration.

    Identifying what you bring to the collaboration is not always as simple as you may think. It is advisable to carry out a full IP audit prior to any collaboration. Often, it will not be instantly apparent that a technology developed in house will be relevant to a collaboration. You may also identify new relevant technology that has not been adequately protected by patent, or indeed other forms of IP that may be useful to the collaboration (e.g. design rights, trade marks or know-how). Where protection has not yet been sought for technology that may be useful to the collaboration, patent applications or registered design applications should be filed before the collaboration begins. In the case of know-how, this should be documented accurately before the collaboration begins.

    Being able to demonstrate precisely what IP you own before entering the collaboration has two principal advantages. Firstly, it enables you to show your true worth to your proposed partner. Secondly, there can be no dispute later in the collaboration over who owns technology when you have indicated it is yours from the outset. It is much more difficult during a collaboration to point to a technological innovation discussed for the first time part of the way through collaboration and state that the technology is yours, rather than jointly created as part of the collaboration. It is important to be honest to your collaborator about what technology and IP protection for the technology you bring to the collaboration. It is difficult to think of anything that is capable of killing collaboration faster than one party identifying that the other has mis-sold its contributions to the collaboration.

    The first step in establishing what your partner brings to the collaboration is by reviewing a full disclosure from them of their technology, and the IP that protects that technology. It is advisable to carry out at least a minimal due diligence on IP rights disclosed to you, for example, att least basic checks should be carried out in order to confirm that the disclosed IP rights exist (including checking that any maintenance fees to keep the IP rights in force have been paid) and that your proposed partner is indeed the owner of those IP rights (you would be surprised how often this turns out not to be the case).

    Merely demonstrating a large portfolio of IP rights is not sufficient to demonstrate your partner’s worth to the collaboration. An analysis of the validity of the IP rights is advised, particularly if many IP rights are pending and have not been granted, as well as an analysis of the commercial importance of the IP. IP brought into the collaboration is only of value to the collaboration if that IP underpins the commercial goals of the collaboration, and is sufficiently broad in its scope of protection to prevent third parties easily designing around that which is protected. (The above analysis could have assisted Case Study 1.)

    After you are satisfied with the analysis of what you and your partner bring to the collaboration, you must then address the more difficult question of ownership of technology created during the collaboration. An understanding of how ownership of technological innovations — and more particularly the IP that protects the innovations — is established is important. Although the rules of ownership of IP are governed by national IP laws, it is most common, at least for patents, for ownership of inventions made by an employee to ultimately pass from an employee to the employer, assuming the creation of inventions were part of the normal duties of that employee. A transfer in rights from the inventor/employee to the employer may be automatic in some countries, whereas others require formal assignment.

    The same is not usually true in a contractual relationship (i.e. where the contractor is not an employee). Ownership of any technical innovations developed by a contractor does not normally automatically transfer to the company instructing the contractor, unless this is stipulated in the contract governing the collaboration. Consequently, once a technological innovation is created during a collaboration, one must first identify the inventor that first arrived at the inventive concept. This is not always easy in a collaborative environment, so it is always advisable to keep proper records of all communications and minutes of meetings between the parties. In summary, unless a contract governing the collaboration stipulates differently, the technical innovation is likely to be owned by the employer of the inventor, or the inventor themselves if they are a contractor.

    In some instances, it may be convenient to maintain the status quo implied by basic legal principal discussed above (i.e. the party creating the technology keeps it). In which case, such a position should be made clear in the contract governing the collaboration, preferably with an indication of how the new technology can be exploited by the collaboration should this be required (e.g. an agreed in-licensing arrangement). Regular review meetings to discuss new technological developments during the collaboration, and how these are going to affect the collaboration, are of course vital. The alternative position to take is that both parties agree to equally share ownership of all IP created through the collaboration. It should be considered, however, that this would tie both parties together; is this desirable? Additionally, the nature of the joint ownership should be agreed in contract; e.g. who pays the cost of obtaining IP protection, who pays the cost of any litigation related to the IP, and are the parties permitted to grant sub-licenses? This analysis may have helped with Case Study 3.

    Finally, both parties must understand what the other’s most basic needs are from the collaboration. A collaboration agreement should truly reflect these needs. The drawing up of an appropriate agreement may have helped with Case Study 2.

    In conclusion, as many of us learned at school to our cost, being poorly prepared by not doing your homework will only get you into trouble.


    Craig Thomson is director, Patents at Murgitroyd & Company, one of the largest firms of European Patent & Trade Mark Attorneys. The firm has a worldwide network of 14 offices, with 12 located in Europe (UK, Ireland, France, Germany, Italy and Finland) and two in the U.S. This article was adapted from a presentation that Mr. Thomson gave the 3rd Oral Drug Delivery Meeting, hosted by Encap Drug Delivery, a CDMO dedicated to liquid and semi-solid (hot melt) filled capsules. Mr. Thomson can be reached at craig.thomson@murgitroyd.com.
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