10 Insights from Executing 200 Patent Landscapes for Start-ups Funded by the National Institute of Health

James H. Moeller - Moeller Ventures, LLC - https://www.moellerventures.com/

January 31, 2022

(Read-Time: ~25 minutes, Word Count: ~2,500.)

For nearly 40 years the U.S. Federal Government has been providing funding to start-up businesses via a pair of programs entitled Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR). The National Institute of Health (NIH) is one of the agencies providing this type of non-dilutive start-up funding and is the principal agency tasked with funding life science start-ups that are involved in cutting-edge and next-generation medical research and development.

But in addition to providing funding, the SBIR / STTR programs also provide support to help commercialize the funded R&D projects via the start-up businesses. For the NIH this commercialization support is provided by its Technical and Business Assistance (TABA) program. As part of the TABA program, the NIH recently completed a 12-month project that provided commercialization assessments to a group of 200 NIH-funded life science companies. These reports delivered assessments and recommendations covering 11 different areas critical to commercialization success.

An Intellectual property (IP) assessment was one of the areas analyzed and utilized a patent landscaping process that focused on the specific technology domain of each individual start-up business. The execution of these 200 patent landscapes, which was subcontracted to Moeller Ventures and m.zoro Consulting, provided a unique platform from which to deduce valuable high-level insights that are foundational to the future development of life science intellectual property and more broadly applicable to the IP strategy of any technology-oriented business. These insights are listed and summarized below.

  1. Embrace Data Science and Analytics Tools for IP Analysis
  2. Patent Analytics are Great, but Only a Piece of a 360 Degree Business Intelligence View
  3. White Space Research is Significantly Underutilized
  4. Freedom-to-Operate Research Should be More Routine
  5. Automated Patent Landscaping Can Provide Exceptional Value
  6. Ignorance is Not Bliss when it Comes to Patents
  7. Patents Should be Positive ROI Producing Assets Aligned with the Company's Growth Strategy
  8. IP Legal Counsel Should be Directly Aligned with the Company's Growth Strategy
  9. Yes, Software Patents are Possible
  10. IP Analysis can be a Key Enabler in Connections with Potential Business Partners, Start-up Accelerators, and the Venture Capital Community

1.    Embrace Data Science and Analytics Tools for IP Analysis

Business intelligence is produced at an astounding rate across today's information technology-based economy. The flow of information is so overwhelming that it is impossible to analyze manually. As a result, data science and analytics tools are a requirement in processing that information and extracting meaningful insights. This is particularly true with intellectual property where new tools are revolutionizing intelligence mining, including patent landscaping, white-space research, freedom-to-operate (FTO) analyses, and prior art investigations.

For the NIH project, the PatSnap Connected Innovation Intelligence platform was utilized to produce the patent landscapes that were consistently ranked as being highly valuable to the commercialization initiatives of the companies. The PatSnap tool enabled a very efficient process to execute complex IP analyses and was vital in delivering intelligence insights. While the tool is unlikely to fully replace IP professionals anytime soon, it is clear that this tool and others like it are the future of IP research and a significant differentiating advantage for those who embrace this technology.

2.    Patent Analytics are Great, but Only a Piece of a 360 Degree Business Intelligence View

While the IP analysis provided significant value in the NIH commercialization reports, it really represents just a portion of broader business intelligence critical to commercialization success. In fact, the most significant synergies are realized when combining strategic information resources together with the appropriate data science and analytics tools to provide a more automated platform for information integration, knowledge mining, and intelligence interpretation.

PatSnap represents one of the best tools currently focused mostly on patent literature. But for many of the NIH life science companies, this intelligence can be magnified significantly when combined with other resources such as Google's BigQuery patent information, life science non-patent literature via PubMed, regulatory filings from the FDA, clinical trial studies from ClinicalTrials.gov, or chemical information available via SureChEMBL. Even resources beyond the life science areas can be leveraged to provide strategic commercialization intelligence such as industry financial information from resources like Edgar Online or Financial Modeling Prep. All these resources offer application programming interfaces (APIs) to automate information integration with modern data science tools. This type of intelligence automation is quickly becoming the norm and will certainly be the future of strategic decision-making for not only start-up commercialization but also for investing, corporate business development, M&A, and venture capital.

3.    White Space Research is Significantly Underutilized

Developing intellectual property is difficult. It usually involves significant R&D followed by the pursuit of patents via an expensive prosecution process that is fraught with approval uncertainties. Leveraging white-space research into IP development has historically been expensive, problematic, and error prone. It is, after all, a search for lightly patented areas of a given patent landscape, which roughly equates to a paradoxical query for IP that's not present. However, new patent analytics tools are dramatically changing the white-space research process by leveraging semantic analysis, natural language processing (NLP), and similarity assessment to identify landscape IP clusters as well as white-space IP voids. These new processes can dramatically improve the insights gained via white-space research.

While often recommended as an IP development tactic with the NIH companies, none of the 200 companies analyzed indicated that white-space research had been utilized and only a few seemed to understand the value. This was somewhat surprising given the significant extent to which nearly every company relies on IP and patents to protect its inventions and market differentiating advantages. Ultimately white-space research can be used to focus R&D initiatives and draft better patent applications that avoid crowded landscape areas and improve the chances of having the patent approved.

4.    Freedom-to-Operate Research Should be More Routine

Freedom-to-operate research is another area that benefits greatly from new patent analytics tools and should be incorporated as a more routine part of IP development. New data tools can utilize NLP semantic queries to uncover the most relevant similar patent documents and help identify patents and specific claims that could be FTO issues. The insights gained from this type of research can be extremely beneficial in drafting patent applications that maximize FTO, avoid existing IP, and improve the prospects of obtaining a granted patent. In addition, FTO research can be a very beneficial initial step towards a full FTO legal opinion that's often pursued in potentially litigious situations to defending against charges of willful infringement (and treble damages) by competitors.

Many of the NIH companies seemed to be aware of similar patent documents but only if encountered in the technical R&D process and most had not executed a broader FTO analysis. In addition, for start-up companies in general, this type of analysis can be integrated into a company's development strategy to minimize future IP infringement risks associated with market entry. FTO research can also increase the value of a company's IP in the eyes of investors or acquirers by showing that proper due diligence has been executed. Finally, FTO analysis is an excellent way to identify IP sector competitors and highlight relevant IP licensing opportunities.

5.    Automated Patent Landscaping Can Provide Exceptional Value

Automated patent landscaping proved to be a fundamental enabler in efficiently evaluating many aspects of the commercialization potential for the NIH funded companies. In particular, the landscaping process can profile the IP sector competitive environment, assess risks associated with uniqueness of a company's IP, and uncover specific IP sector patenting trends.

For example, the IP sector competitive environment can be profiled by compiling the top assignees from a patent document domain collection focused on a company's IP sector. While these companies are often initially viewed as market competitors, they can also be potential collaborators, investors, and licensing opportunities. Additionally, landscape diagramming can be used to identify clusters of similar patent documents, which provides a visual risk indicator based on the nearby concentrations of comparable IP. This can further indicate the extent to which a company can potentially leverage their IP into market differentiating advantages. Finally, timeline trend charts of filed applications and granted patents can provide significant insight into the allowance environment and the ease or difficulty with which patents can be obtained.

6.    Ignorance is Not Bliss when it Comes to Patents

Companies involved in intellectual property development often encounter a patent application regulatory requirement called the Duty of Disclosure (37 CFR 1.56). This regulation simply states that everyone involved in filing a patent application (inventors, patent practitioners, etc.) must disclose all information known to them that could be material to the patentability of the invention.

Unfortunately, several companies in the NIH project interpreted this requirement as justification not to execute any IP research with the hope that this would result in improved prospects for a granted patent because minimal prior art was submitted with the application. This is typically not the case and can result in wasted time and money when an application is rejected in the examination process, or a patent is invalidated post-grant. In fact, there probably isn't an organization better equipped to research patents and prior art than the U.S. Patent and Trademark Office (USPTO). One need look no further than the USPTO website to understand the extensive resources available to examiners to execute this type of research. So, it's unlikely that examiners will not uncover relevant patentability information simply because it isn't submitted by the applicant.

Consequently, spending time and money in the beginning of a patent application development process on landscaping, white space research, or freedom-to-operate analyses, can be efficient ways to gather the IP intelligence needed to avoid competitive IP and truly improve the patent approval prospects.

7.    Patents Should be Positive ROI Producing Assets Aligned with the Company's Growth Strategy

Patents are often pursued as a routine course of action when a potential invention is encountered during the R&D process. This is particularly true with SBIR / STTR funded companies that often evolve out of deep academic research. The abbreviated thinking is that the invention is unique, it's potentially instrumental to the company, and thus should be patent protected. However, that rationale is usually missing a critical detail regarding just how instrumental the invention can be in terms of market differentiating advantages. Patents are expensive and should always be pursued with the intent that there will be a return on that investment (an ROI) that is directly in-line with the company's growth strategy.

For the NIH companies, it was often recommended that patents be viewed in this ROI perspective and focus on using IP as market differentiators to realize unique product or service offerings, higher profit margins, or increased market share. In addition, this connection between protected IP and market differentiators can often provide positive feedback into the R&D process to further maximize the development of ROI producing IP. Finally, this topic is critical to the fund-raising process and venture capital investors, who are specifically looking for valuable protected IP that can be leveraged to produce superior financial results.

8.    IP Legal Counsel Should be Directly Aligned with the Company's Growth Strategy

Given the extent to which patents directly factor into the enterprise value of the early-stage NIH companies, it was surprising that there were numerous companies with misaligned IP legal counsel activities. Fundamentally, IP legal counsel should directly align with the company's growth strategy in terms of protecting the most market-differentiating IP and ensuring that protection is provided in all of the company's geographic addressable markets, both domestic and international.

Many of the NIH companies are postsecondary academic spinouts, required to utilize the university's IP legal counsel, and with the companies often licensing the patents from the school. While this is financially advantageous for minimally funded start-ups, it sometimes results in strategy misalignments between the patents that the university is willing to pursue and the company's IP-oriented market differentiators that need to be protected. Additionally, there were situations where the university didn't or wasn't willing to pursue IP protection in international patent jurisdictions. For these situations, it proved to be very beneficial to pursue a secondary opinion with an outside IP law firm, and particularly with a firm that can provide international and multi-domain expertise (for example, life sciences and software, see below).

9.    Yes, Software Patents are Possible

Across the 200 NIH life science companies there are a surprising number that utilize software in potentially patentable ways. However, there are also significant misunderstandings regarding the potential to obtain software patents. Many NIH companies operate under the presumption that software patents are not possible. This is simply not true and not supported by software patenting trends. In fact, patent law regarding software is becoming clearer and more established (referenced USPTO Report) and more software-related patents are being issued.

Many of the misunderstandings in the NIH project seemed to come from the intersection of the life science and software domain areas. This is another issue where the appropriate IP legal counsel can add significant value. Patenting software is still a nuanced endeavor and requires IP counsel with experience in software patents as well as, for the NIH companies, complementary life science domain expertise. For the NIH IP analyses, the patent landscapes were very effective in producing patent document domain collections that specifically identified the software-oriented IP related to specific life science domain areas. In every case this type of patent research was able to add considerable perspective into how these life science companies should pursue software patents.

10. IP Analysis can be a Key Enabler in Connections with Potential Business Partners, Start-up Accelerators, and the Venture Capital Community

Overall, the NIH funded companies are pursuing some truly impressive projects. The research behind many of these businesses is extensive and is often the culmination of decades of work within an academic university. As a result, these represent some of the most cutting-edge and next-generation advancements in the fields of life science. However, these NIH companies often struggle to connect to synergistic businesses, venture capital investors, and even start-up accelerator programs that can help take the start-up to the next level of commercialization. The IP analysis can be a key enabler of these connections by helping to identify potential partners and by providing IP valuation rationalization that can be marketed to accelerator programs and the venture capital community.

For example, with the landscape analysis, the list of top assignees for a particular domain space is typically a prime source of companies involved in the IP sector and can be used to identify potential business partners, corporate investors, and even prospective acquirers. In addition, start-up accelerator programs can often be extremely useful for founders coming from academia, and an IP analysis that assesses uniqueness and/or freedom-to-operate can be instrumental in acceptance into these programs. Finally, any discussion with a venture capitalist will inevitably cover similar issues of uniqueness, defensible market advantages, and protected IP. An IP assessment can help articulate a company's unique IP position and the potential value embodied in its patents.

Jim Moeller provides customized consulting services leveraging analytics and data science tools, for data integration and intelligence mining, aimed at projects focused on intellectual property research, market analysis, and business development. Executed project domains have covered medical devices, pharmaceuticals, biotechnology, digital and connected health, wearables, telemedicine, IoT (Internet-of-Things), and wireless communications. Jim is a U.S. Registered Patent Agent with experience spanning consulting, investment banking, and engineering. https://www.MoellerVentures.com.