Editor's Note: This is part two of a two-part series. Part one ran in Thursday's issue.
For more than a decade, Repligen Corp. and Bristol-Myers Squibb Co. worked in the field of CTLA4-Ig - the former through a license with the University of Michigan and the latter independently.
Both have intellectual property for their respective products, one of which, BMS' Orencia, received FDA approval for rheumatoid arthritis in December.
Now Waltham, Mass.-based Repligen wants a share of the sales, and despite BMS' patents covering Orencia, it has filed to take the New York-based pharmaceutical company to court for infringement of its own U.S. patent No. 6,685,941.
Protecting intellectual property is a little like crossing the road, said Bruce Sunstein, a patent attorney with Boston-based Bromberg & Sunstein LLP. If you don't watch out and look both ways, you could get run over.
Patent Protection: What It Will, Won't Do
Patents may protect an invention to a certain extent, but it's not uncommon for inventors to face challenges from other like-minded researchers.
"If you're in an area of doing any product development," Sunstein said, "chances are pretty good that you won't be working in isolation."
In technical terms, a patent can exclude companies from making, using or selling the invention that is protected. Clinical development of a drug like CTLA4-Ig would technically be considered "using" the invention covered under the Repligen and BMS patents. But experimental work often is permitted until a product reaches commercialization.
But why is that? Why not keep everyone away from all aspects of your patented invention?
"Because it's very hard to prove that somebody did a bad thing when the work is in the early stages, and secondly, it's very hard to show that you're being harmed by that," Sunstein said.
Repligen president and CEO Walter Herlihy called patents a "bedrock of value" for the pharmaceutical business. While disputes often come up, it is important to have that intellectual property protection for as long as possible. When a patent expires, Herlihy said, "an innovator's product usually goes down in sales, rather dramatically."
Repligen made known two years ago its desire to form a cross-licensing agreement with BMS - but the pharmaceutical company apparently felt otherwise.
"One does not normally sue if one thinks one can achieve a negotiated result without suing," Sunstein said. "Suits of patent infringement are very expensive. To bring on patent litigation, you have to be prepared to spend seven figures of money."
In its complaint against BMS, Repligen is asking the court to award the company all costs of the litigation, in addition to damages and a permanent injunction restraining BMS from selling Orencia.
Elemer Piros, an analyst with New York-based Rodman & Renshaw, estimated the litigation would cost Repligen about $2 million to $3 million per year. To spend that much, the company and the University of Michigan must be "confident in their patent position," he said.
"They have good reasons to be," Piros said, explaining that the U.S. patent office examined the application for Repligen's licensed patent for several years before issuing it to the university. A similar patent was issued in Europe, and neither were challenged by BMS.
Most disputes of this kind are resolved by settlement, Sunstein said, particularly if the court finds in favor of Repligen and then holds the power to determine the royalty rate.
"If you're going to be found to infringe, you'd have a pretty substantial incentive to try to settle it," Sunstein said.
Royalties for an enabling technology could be as little as a fraction of a percent, or sometimes as high as 5 percent, he said, adding that the variance "may well depend on how easy it is to circumvent the technology."
Dispute's Repercussions For Biotech, Pharma
Although a court decided there was not enough evidence to put University of Michigan scientist Craig Thompson as an inventor on the BMS CTLA4-Ig composition-of-matter patents, the fact that BMS felt it necessary to refute Thompson's contributions to the invention does not bode well for BMS.
"For big pharma, the job is how to keep your pipeline full [while] still maintaining good and effective relationships with universities and companies that are going to help fill it," Sunstein said. "So I think the litigation is a sign that in your efforts to keep the pipeline full, you have to work very hard to groom the relationships with your oil suppliers, or in this case, with your idea suppliers, to minimize the risks and difficulties."
Everybody wants a piece of the action, and the courts realize that. Once a product shows financial potential, the interest level rises. But the University of Michigan and Repligen always have maintained their claim on BMS' technology, and BMS has not had much to say about the case: "We're reviewing the complaint, and we're going to respond through appropriate legal channels," said David Rosen, a spokesman for the company.
In its SEC filings, BMS has acknowledged the existence of the Repligen patent, saying it "claims the use of CTLA4-Ig to treat specific autoimmune disease, including rheumatoid arthritis." But the filings also make note of Repligen's failed attempt to get the University of Michigan scientist listed as an inventor on the BMS patents.
"Who knows what went on to produce this level of dispute," Sunstein said. "But it does show that disputes like this are a serious hazard of trying to keep your pipeline full."
BMS holds sole ownership rights to several patents covering the soluble forms of CTLA4 and related methods of use. But will that be enough to prevent Repligen from getting royalties for Orencia? And will it hurt the pharmaceutical company's relationships with university researchers?
Those are questions that will have to be dealt with legally. Repligen has retained Fish & Richardson P.C..
"It seems to me the BMS position is that the stuff that's in their pipeline is their own oil, that none of it is imported," Sunstein said. "I think that's the lesson for the industry. It's that you must watch very closely to how your pipeline gets filled."