Pharmaceutical companies intent on finding the next blockbuster drug increasingly view patent litigators as a secret weapon at the bargaining table, proving their value to an industry built on intellectual property and dealmaking.
The trend of IP litigators as strategic business advisers has grown over the past decade, as brand-name drugmakers look to them for help in determining what types of deals to strike—acquire vs. partner vs. license—in a way that best dovetails with the pharmaceutical company’s own R&D and broader business interests.
“The strengths that companies are looking for in IP lawyers is that strategic eye they bring to the deal,” said Lisa M. Ferri, global co-chair of Mayer Brown’s intellectual property practice.
“A lot of litigators in the IP world are often part of the team now assessing these portfolios because they’re bringing this strength of being able to assess risks and opportunity with a litigator’s eye,” she said.
Clients increasingly count on IP lawyers to be at the deal table to evaluate all the patents in a company’s portfolio and to gauge their compatibility to the brand-name firm’s own product line, with the ultimate goal of understanding the exclusivity terms and corollary value of any potential deal. It presents an opportunity for IP litigators to have a more influential role in the pharma world, while ensuring their clients aren’t running afoul of patent law or investing in IP that won’t go anywhere.
For example, IP was an important factor in Bristol-Myers Squibb Co.’s acquisition of Celgene last year. Both companies touted their “complementary portfolios” for treating cancer, immunology, inflammation, and cardiovascular diseases. Celgene’s blood cancer drug, Revlimid, was an attractive part of the merger that went on to boost sales for Bristol-Myers.
While the influence of IP litigators in dealmaking unfolded slowly, the difference is dramatic when looking back, said Brian Kacedon, an IP partner at Finnegan who declined to comment on any specific deals.
“When I first started practicing 20 years ago, it was very much like you were a patent prosecutor [writing patents] or you were a patent litigator,” he said. “For the stuff in between, there were a lot of deal lawyers and there were people in-house. Outside counsel wasn’t doing that as much.”
He added that it’s beneficial to have IP lawyers involved in these transactional areas where they weren’t before.
“If the most important part of the deal is really the intellectual property, then involving people who work on that issue day in and day out is really important,” Kacedon said.
One element driving the shift is the inter partes review system at the U.S. Patent and Trademark Office. Because “it is much more a hybrid of litigation practice and patent prosecution practice,” it’s better preparing patent litigators to play a part in dealmaking, said Erik J. Olson, a partner in Morrison Foerster’s Palo Alto office.
The review process was introduced in 2012, providing a widely used path for challenging the validity of patents based on an invention being obvious or being previously disclosed in a prior body of published or known work.
IP lawyers have seen a dip in litigation ever since that review process was introduced, giving them more room to take on different roles, said Kevin Noonan, a partner with McDonnell Boehnen Hulbert & Berghoff LLP.
“If you can pitch it to a client that it’s good to have this guy in the room because he’s going to catch a problem, then that’s a way for this guy to keep making you money,” he said.
Another factor has been the Biologics Price Competition and Innovation Act, Olson said. The 2009 law created a faster process for obtaining Food and Drug Administration approval for biosimilar versions of innovative products.
“It created a new biologics pathway, which creates more pressure around trying to model when other companies may enter a market and how other new biologics or new biosimilars may affect other revenue streams,” Olson said.
Rapid advances in technology are putting pressure on big pharmaceutical companies to find the next big blockbuster, which is also leading to more deals getting made, Ferri said.
“Over the last ten years or so, we’ve seen this change in terms of companies looking outside of their own research and development in order to fill their product pipelines and strengthen their portfolios,” she said. “As the business has changed, lawyers have changed with it.”
It’s become a more attractive option for companies than independently investing big dollars into their own production line to take a new drug from early stage compounds through costly clinical trials, regulatory hurdles, and everything else that leads up to commercialization.
“You rarely see that now,” Ferri said. “Most of the major blockbusters now are the result of collaboration of some sort. We’ve seen that shift in the industry and the lawyers working in the industry have to shift with it.”
That translates into more deals, and the need for more IP lawyers to help complete them.
“You have to have the skill set to assist clients with doing that,” Ferri said. “It’s all about the IP around these drug therapies—that’s what’s driving the deal. So the IP lawyers are really at the forefront of these strategic collaborations and acquisitions.”